Central Bank of Kenya Denies Coin Shortage

Started by Bimat, November 06, 2012, 04:26:42 PM

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Bimat

Central Bank of Kenya denies coin shortage

TUESDAY, NOVEMBER 6, 2012 - 00:00 -- BY LOLA OKULO

CENTRAL Bank of Kenya issued 9 million new pieces of coins last month and has denied any shortage amid complaints by traders. In a press statement released yesterday, CBK said it has issued 1.29 billion pieces of coins to date adding that there is adequate stock of coins in circulation.

"The general public and in particular supermarkets, shops, kiosks and other retail outlets are urged to readily accept and promote efficient circulation of the coins without any reservations whatsoever," said the bank in the statement.

Aside from complaints over shortage of coins, customers to various retail outlets have in some cases faced problems when paying for items and services using 50 cent coins which many traders have been reluctant to accept.

In some supermarkets, customers are sometimes given sweets or matchboxes as a substitute for coins as part of change after making payments.

"The Central Bank would like to take this opportunity to clarify and assure the public that the country has adequate stocks of currency coins and continues to issue them pursuant to the Central Bank of Kenya Act Cap 491," said the bank.

The bank said it is working on plans with major supermarkets and commercial banks to promote efficient coin use to promote proper circulation in the economy.

The statement comes few months after the bank launched a plan together with supermarkets and some retail outlets and restaurants to buy coins for the sake of reissuing them back to customers as change to boost circulation. At the time, the bank said, hoarding of coins was the cause of shortage that had been reported then by many traders and businesses.

Source: The Star
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

haaseizhere

I just went around today to see if these coins that I know are available in the central bank are getting to supermarkets.  In many locations supermarkets and even banks still do not have access to the coins.  This shortage somehow still persists in Kenya.  I remember the bank declaring this sometime last year that there is no such thing as a shortage of coins, but on the streets there is definately a shortage.  I went ahead and got 100 of each of the new coins in case they do not send them into circulation.


Figleaf

This happens in many countries. I think the mechanism is this:

To central bank bean counters, the value of a coin is its denomination.

To buyers and sellers, the value of a coin is its ability to transfer wealth. If the seller does not trust the coin, its value is zero, irrespective of its denomination (see the coins of the Zimbabwe dollar). If the seller trusts the coin and the buyer trusts that she can get another one, its value is its denomination (the normal case).

However, if the seller trusts the coin and the buyer does not trust that she can get another one, its value is denomination plus the value of the necessary time and energy to get another one (replacement value). As long as the replacement value is greater than zero, it is worthwhile in the mind of the buyer to hold on to the coin or to overpay and receive another coin in change. It is also worthwhile for the seller not to give change in coins and to set price so that coins must be used. Some sellers (e.g. bus drivers, road toll collectors or vending machines) may never give change. This is where the coins will be used. In other cases, they will be hoarded to be used where change is not expected. The hoarding will make the coin harder to get, increasing its replacement value. Newly issued coins will decrease the replacement value (depending on distribution method.)

It follows that calls to use hoarded coins will not be heeded, as they do not take the replacement value into account. As long as central bankers do not understand this mechanism, the replacement value will be greater than zero. This can also be seen as hidden inflation, which may be a reason why central bankers deny the existence of the replacement value.

The solution is to saturate the market with coins. This will drive the replacement value to zero. The hoarded coins will be used and mintage can be diminished as long as there is sufficient trust that a coin spent can be replaced.

Look at mintage figures for new types in large economies. You will quite often find that the figures for the first two or three years are huge, followed by a period of several years of low mintage. I guess I am not the first one to come up with this theory. ;)

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

haaseizhere

I just found out that the newly released coins (dated 2010) are different than the earlier coins.  Aparently the weight is different (for 5, 10, 20) as well as the design (on 5 and 10).  I guess it is because it costs more to produce a coin than the value of the coin which is why they struggle to release them into circulation.  I hope the weight difference or metal composition difference made them cheaper to produce.  Where do you find statistics on metal composition of these coins?

Figleaf

Depends. Sometimes the central bank web site. Sometimes a coin catalogue. Sometimes a site like this one.

The differences in size are a clue to the (little) use of vending machines.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

haaseizhere

unfortunately all these parking lots around in malls now have these automated parking machines that take coins (but not the new coins) so they all now have to hire parking lot automatic coin machine attendents in order to take your new coins and replace them with old coins to put them into the machine.