Money changers in Uganda including commercial banks and forex bureaus and individuals are stuck with billions of Kenyan denominated shillings after the Bank of Uganda (BoU) announced it will not accept East Africa’s strongest currency at its counters.
BoU’s move follows a letter written by the Central Bank of Kenya (CBK) to its East African counterparts in Uganda and Tanzania explaining its move in issuing new series of Kenyan banknotes starting May 31, 2019 in a bid to fight illicit flows and counterfeits into Kenya.
BOU in a letter dated June 10, 2019 to commercial banks, says that changing Kenyan currency from old to new banknotes can only, for now, be done in Kenya. This means, anyone with old Kenyan notes in Uganda will have to carry them to Kenya to replace them for new ones subject to CBK’s guidelines.
CBK has also suspended currency conversion and repatriation of Kenyan currency.
“In light of the new developments the Bank of Uganda…will not accept Kenya shillings with immediate effect,” said Charles Malinga Akol, BoU’s Executive Director Operations.
Akol in a letter advised commercial banks to do an enhanced due-diligence on Kenyan currency given the recent changes it has undergone.
Bankers this website talked said they have billions of shillings of the Kenyan old currency but said they were talking to Kenyan authorities to see how to convert them into new ones. “We are working on that issue with the Kenyan authorities and soon we shall inform our clients,” said an executive of one of the leading commercial banks in Uganda.
Meanwhile, the Bank of Tanzania has also frozen exchange of Kenyan bank notes with immediate effect.
The announcement is a blow to perpetrators of illicit financial flows who have sneaked huge amount of Kenyan currency into Uganda and Kenya, hoping to launder it into local currencies.
It is also a big blow to Kenyan traders seeking to exchange money to trade in Tanzania and Uganda.
Kenya unveiled new bank notes to the public on June 1 and announced plans to phase out old generation Shs1000 notes by October 1.
Speaking to journalists in Nairobi on June 3, CBK Governor Patrick Njoroge said he will be reaching other regulators in the region to ensure a smooth transition from old to new bank notes.
‘’We are going to work closely with every stakeholder in the financial sector including our sister Central Banks in the region to ensure a smooth transaction and fight against illicit financial flows,’’ Njoroge said.