Phaseout of old notes disrupts border trade

Kenya’s decision to withdraw the old generation Sh1,000 currency notes from circulation by October 1 this year is hampering trade along the border with Uganda.

The Central Bank of Kenya (CBK) on June 1 announced the replacement of the old Sh1,000 currency note with a new one that has additional security features, while the smaller denominations will be phased out over the next three years.

At the border towns of Malaba, Suam, Busia and Lwakhaka in western Kenya, the old Sh1,000 notes are highly valued by traders. However, the decision by Uganda’s central bank to stop changing Kenyan currency has placed new hurdles to cross-border trade in agricultural commodities and even industrial goods.

At the border points, traders now prefer to be paid via mobile money as demand for Ugandan currencies surges. 

Disgruntled traders explained the frustration they have suffered since the announcements.

The Kenya National Chamber of Commerce and Industry (KNCCI) termed the situation in Uganda as fluid. “The consequences of Kenya’s currency change are going to be felt right from the border towns of Busia, Malaba and Kampala because millions are still held by that country’s businesses,” said Peter Kubebea, chairman of KNCCI’s Busia chapter.

John Akiki, who operates a fashion shop at Malaba town, said the Ugandan businessmen prefer transacting in shillings, particularly the Sh1,000 notes and US dollars. “It is worrying that the withdrawal of the Kenyan notes affects their business,” said Akiki.

The situation is the same at the Kenya and South Sudan border towns. Kenya shilling is the most preferred over the Sudanese pound at the exit and entry points of the two countries.

Negative impact

Traders at Lokichoggio town shared similar predicament as the deadline to end the use of Sh1,000 notes is coming closer. They said the decision will hurt business at the border.

“It is disturbing that our government decided to give a short period in withdrawing the notes from circulation. The action is going to affect business at the border and this will have a negative impact on the economy,” said Pius Ewoton, chief executive officer of KNCCI’s Turkana chapter.