• CBK explains that the tender was handled at NSAC, Cabinet level.
• The new currency is already in circulation.
Image: EZEKIEL AMING'A
Kenyans will pay Sh14 billion to replenish old currency notes for the next five years.
The Central Bank of Kenya disclosed this Wednesday in a meeting with the Finance Committee of the National Assembly chaired by Molo MP Kuria Kimani.
It emerged it would take an average of $53 (Sh6,800) to print 1,000 pieces of bank notes.
CBK governor Kamau Thugge defended the direct procurement of German firm Giesecke+Devrient Currency Technologies (G+D).
The firm is expected to print 460 million pieces of Sh50 notes, 690 million pieces of Sh100 notes, 260 million of Sh200 notes, 170 million of Sh500 notes and 460 million pieces of Sh1,000.
A total of 2.04 billion currency notes are set to be printed (with monetary value of Sh689 billion), down from the 2.35 billion in the 2019 series.
It also emerged the new notes are already in circulation (for Sh1,000). Others will follow in due course.
Thugge said the banks regulator used classified procurement owing to the sensitivity of currency printing and the urgency of replacing worn-out notes.
The meeting was told the amount of money in the economy has continued to decline-estimated at about Sh330 billion worth of currency.
The CBK boss said the decision was approved by the National Security Advisory Council (NSAC) and the Cabinet.
“It is the mandate of the CBK to ensure there is a right amount of money in the economy,” Thugge said.
He said the move followed a shortage of bank notes after the contract with De La Rue ended in January 2023.
“In mid 2023, CBK determined that a stockout was looming, especially for Sh1,000 notes. We began procuring and applied for a classified procurement process,” Thugge said.
“The implications of having a stockout were gross. It adversely impacted on price stability and the exchange rate. Notes get torn and are withdrawn from economy, the supply reduces. We need to replenish to avert stockout.”
He said the government followed the practice of many countries where such contracts are handled as classified.
“This matter was initially considered by the NSAC. The Cabinet memo approving the tender was signed by the National Treasury and the process was approved by the Attorney General,” he explained.
Thugge said CBK gathered data “openly and confidentially” after which it settled on the German firm in line with Section 90 of the Public Procurement and Asset Disposal Act.
“NSAC and Cabinet approved the classified and CBK was informed accordingly. We were asked to work with security agencies to achieve the objectives.”
This was even as MPs demanded explanations on why the tender was not floated in the open as was with the last case.
There were also concerns about the viability of the previous tender after it emerged the new tender cost $3 million less.
“Considering that this would cost $109 million, which is a difference of $3 million compared with the 2019 series, could it be that the 2019 contract was overstated...how do you compare the scope?” Kimani asked.
“Was it really necessary to go through this way other than open tender...when you handpick, what informs the cost...how do you verify the market value?”
Members of the Finance committee also asked why De La Rue exited the country and the fate of government’s 40 per cent stake in the company.
Other questions were on the German firm’s history, ownership, how it was settled upon, whether there were competitors and if there was a validation process.
“This thing must be put right. What informed the choice of the company at the expense of a company where Kenya has shares? It was an avenue for forex earnings since other countries used to print here. Are we not regressing as a hub?” Eldas MP Adan Keynan asked.
Kitui Central MP David Mboni asked, “De La Rue closed...the money is going to another country, straining our exchequer...why the double standards?”
Turkana Central MP Ariko Namoit asked how long it takes CBK to know shortages and what law guides restocking of currency.
In his response, Thugge said the CBK did not want to go private on the deal hence their call for a meeting with MPs.
“There is nothing to hide. We have gone through the process. We went through Treasury. The matter went to Cabinet, which analysed and discussed it and we were informed it was appropriate to go through the classified procurement process. Everything was done in accordance with the law,” the CBK boss said.
He said De La Rue closed down in its own motion and informed the bank of the same before its exit.
“De La Rue made its own decision to close down. No one in government asked them. They wrote saying they were going to reduce their presence here...they had five currency sites, shutdown two including the Kenyan site. It was a business decision by them,” Thugge said.