How other Countries Performed with New Currency Notes

The new currency in Kenya (notes). It was somewhat of a surprise on Madaraka day when President Uhuru and his Central Bank Governor surprised Kenyans with new currency notes. It was the second and last phase in Kenya’s currency reform in line with the 2010 constitution. Besides fulfilling the requirements of the constitution, the move is also aimed at stemming corruption. Hence, unlike countries where demonetization was a complete surprise, Kenyans had been wildly speculating and anticipating the introduction of the new currency since 2010.

Will Kenya achieve its goals with demonetization or will it fail? By exploring such events in other countries within and beyond the continent will reveal a few realities Kenyans will have to grapple with in the near future.

Myanmar (Burma)

In 1987, Burma’s military expunged about 80% kyats in circulation with the aim of curbing the black market. However, commercial activity in the country immediately came to a standstill with most currency deemed worthless. The government under the leadership of General Ne Win faced a lot of backlash common citizens.

Especially students who could no longer access financial aid from their parents. Widespread dissatisfaction in conjunction with demonetization of the Kyat led to massive protests that led to the 1988 revolution.

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India

Similar to Myanmar, the Indian government in 2016 declared 99% of Rupee notes in circulation void. The government also gave a 50-day deadline for all 500 and 1000-rupee notes to be exchanged in banks with new generation notes. However, the government failed to print new notes fast enough creating a currency crunch that lasted a few months.

That left Indians cashless or in lines waiting their turn to access small amounts of legal tender. Ultimately, 1% of the country’s GDP was wiped out in the cash crunch while 1.5 million jobs were lost. As such, the attempt to flush out untaxed wealth being hoarded by wealthy Indians, only hurt the poor Modi’s government was trying to protect.

Nigeria

During President Buhari first stint as President of Nigeria between 1983 and 1985, Nigeria underwent sweeping reforms. One of these was banning of old notes in an attempt to root out runaway corruption from the country. However, the Nigerian Central Bank implemented the new measure irresponsibly by printing more cash which led to galloping inflation and left a heavy debt burden.

Ultimately, the Nigerian economy was incapable of absorbing the effects of the cash crunch and eventually the economy collapsed. This led to another coup de tat led by Ibrahim Babangida (another dictator) that deposed Buhari from power.

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Ghana

In January 1982, the Provisional National Defence Council (PNDC) government, led by Jerry Rawlings announced the demonetization of the 50-cedi note. The public was only given two weeks to deposit old notes in banks for chits redeemable at a later date. Ghana also shut its border for two years. All that was aimed at stemming excess liquidity, curb tax evasion, punish corrupt politicians, and devalue large sums of the currency outside the country.

This was in the revolutionary spirit of Rawlings’s new military junta that was fed up with successive corrupt governments in the country since independence. However, all the government succeeded to accomplish was make all cedi denominations, including the 20 cedi note, worthless. Subsequently, the public lost confidence in the country’s entire monetary system. People, therefore, resulted to holding physical assets, foreign currencies and relying on the black market for the supply of goods that there were no goods in formal supermarkets and shops for years.      

From the examples above, demonetization is a grim affair that governments always seem to get wrong. Will Kenya’s story be different? Only time will tell.