Currency printing cost rises sharply to Sh2.4 billion

The cost of printing bank notes and minting coins doubled to Sh2.4 billion last year, with the Central Bank of Kenya (CBK) attributing the jump to expenses of printing new generation currency under the Constitution.

CBK’s annual financial statements for up to June this year show currency production costs rose by Sh1.2 billion in the past 12 months, even though the regulator is yet to make public the progress of the expected switch to new-look cash.

The 2010 Constitution required production of new currency that does not bear the image of an individual, unlike currently where Kenyan notes and coins bear portraits of former presidents.

“Currency costs increased to Sh2.4 billion from Sh1.2 billion in 2012 as the bank makes investments in the new generation currency to comply with constitutional requirements,” said CBK in its financial statements.

The Constitution requires the new currency to be in circulation by February 2015.

The current stock of cash will continue to be legally acceptable until it is phased out. The Central Bank, which mainly outsources production of currency, did not provide details on what had led to the sharp increase in costs.

“We are not in a position to comment on the detailed aspects of the accounts until deliberated upon by the Public Investments Committee of Parliament,” said CBK governor Prof Njuguna Ndung’u told Business Daily.

In August, the Secretary to the Cabinet Francis Kimemia said the Cabinet had approved the design of new generation currency, and was working on a production date of 2015. The designs were said to have been selected from the proposals made by the public.

“New currency with our country’s heritage as its key features will be unveiled in the next two years. Cabinet approved the proposal that is set to be ready earliest February to May 2015. Latest being January 2016 which is the worst scenario,” said Mr Kimemia in a tweet sent on August 17.

At present, Kenyan notes and coins bear the images of the first two presidents of the country, Mzee Jomo Kenyatta and Daniel arap Moi. The Sh40 coin, which was released in 2003 to mark the country’s fortieth Independence anniversary, bears the image of former President Kibaki.

The Sh100 and Sh50 notes have a one-year life span while the others have a two-year utility period. The coins have a longer lifespan of 25 years.

As per the financial statements, the currency in circulation, which represents the nominal value of all notes and coins held by the public and commercial banks, increased by 15 per cent. In June, the total cash in circulation was Sh183 billion, compared to Sh159 billion a year earlier.

Centre of controversies

A parliamentary committee heard last year that the Central Bank had procured from De La Rue Company four interim orders of current generation bank notes totalling 1,487,050,000 since 2006 at a cost of Sh5.6 billion.

Currency printing contracts have been the centre of controversies in Kenya, with the public said to have lost more than Sh1.8 billion in irregular procurement of the services.

In a report tabled in Parliament last year, the Parliamentary Accounts Committee (PAC) said that interferences by the National Treasury (then Ministry of Finance) which cancelled a contract between CBK and printing firm De la Rue had seen the public pay Sh1.8 billion more than the initial amount.

The government has stated its intentions to buy a 40 per cent stake in De La Rue’s operations in Kenya at an estimated cost of Sh650 million in a deal that would see the firm increase its investment in the country and produce the currency locally, cutting on the production costs.

The deal is yet to be completed and De La Rue is still engaged on short-term annual contracts.

This article first appeared on Businessdailyafrica.com