CBK annual report shows sharp drop in growth of coins
Posted Wednesday, December 19 2012 at 19:39
- The slowdown came at a time when the proportion of coins compared to notes in circulation has been going down in the past five years, the CBK annual report released Wednesday showed.
- In 2010, the Sh20, Sh10 and Sh5 coins grew by 8.7, 13.0 and 12.8 per cent, respectively.
- The Sh40 and Sh1 coins, which are however not as often used as the other three types, experienced significant growth of 128.4 and 6.5 per cent, respectively, in the year to June.
The growth of coins in circulation slowed down sharply in the 12 months to June this year at a time when traders reported biting shortages of the currency, a new report by the Central Bank of Kenya (CBK) has shown.
The slowdown came at a time when the proportion of coins compared to notes in circulation has been going down in the past five years, the CBK annual report released Wednesday showed.
The CBK data shows that the growth of Sh20, Sh10 and Sh5 coins grew by the lowest figures in three years of 2.0, 0.1 and 0.1 per cent respectively in the year to June, compared to a growth of 8.7, 2.3 and 7.4 per cent in the year to June 2011.
“Public preference for bank notes explains the high proportion of currency in circulation being in bank notes than coins,” said the CBK in the annual report. Bank notes have constituted more than 97 per cent of the currency in circulation most of the time, according to the report.
The cost of producing bank notes remained steady at Sh1.2 billion in 2011 and 2012, while the amount spent on minting coins dropped sharply to Sh7 million this year from Sh584 million last year.
In recent months, the CBK has been on a campaign dubbed Chomoa coins, where it has been urging people to release the coins in their possession to increase circulation.
The CBK governor Njuguna Ndung’u said on November 26 the regulator has issued into circulation over 1.31 billion pieces of coins in various denominations with an estimated value of Sh5.1 billion, which he said were “more than adequate to serve the economy.”
He added that the regulator had released 21 million pieces in October and November, but the problem had persisted due to inefficient re-circulation. The additional injection of coins may not have been captured in the report, which covers up to June.
The regulator said people preferred to store the bulky coins in their homes, cars and offices, causing scarcity.
“We believe that the bulk of coins are held by members of the public... It is therefore clear that the problem of inadequacy of coins in circulation cannot be addressed by adding new coins but by ensuring that there is an efficient mechanism for re-circulating existing coins within the economy,” said Prof Ndung’u.
The CBK annual report showed that in 2010 the growth in the most frequently used coins was also higher than in the year to June. In 2010, the Sh20, Sh10 and Sh5 coins grew by 8.7, 13.0 and 12.8 per cent, respectively.
The Sh40 and Sh1 coins, which are however not as often used as the other three types, experienced significant growth of 128.4 and 6.5 per cent, respectively, in the year to June.
The proportion of coins has fallen to 3.07 from 3.88 per cent in 2007 and every year has showed a downward trend even though the absolute amounts have risen.
The coin shortage has been so severe as to create a situation where traders have been selling coins to retailers who need them most for customer change.