Kenya government has opted for a German company to print its new banknotes, just months after the previous currency printer, De La Rue Kenya EPZ Limited, shut down its local operations.

The Central Bank of Kenya (CBK) confirmed the development on Wednesday, though CBK Governor Kamau Thugge remained tight-lipped about the identity of the German company and the specifics of the deal.

The decision to outsource currency production to an unnamed German entity raises eyebrows, particularly given Kenya’s previous investment of £5 million (Sh820.5 million) for a 40 per cent stake in De La Rue Kenya in 2019.

The local subsidiary ceased operations in March 2023 after incurring £15.1 million (Sh2.48 billion) in closure costs, citing a lack of new banknote orders from the CBK.

Thugge justified the need for new banknotes across all denominations, attributing the move to anticipated stockouts and the age of existing currency.

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“The notes we have are getting old and therefore we need to get new notes. The reason why we started with Sh1,000 notes is that we are projecting there could be a stockout of those notes in July or August and so it was really necessary that we get new notes as quickly as possible,” he explained.

The new banknotes, scheduled for release later this year, will feature the signatures of Dr Thugge and Treasury PS Chris Kiptoo, along with enhanced security features.

However, the decision to engage a foreign printer comes at a potential cost to the Kenyan government.

Unlike the De La Rue joint venture, which yielded dividends of £0.8 million (Sh131.2 million) in 2020, £1.2 million (Sh196.9 million) in 2021, and £0.9 million (Sh147.7 million) in 2022, the new arrangement will forego these revenue streams.

Moreover, the additional costs associated with transporting banknotes from Germany could inflate overall currency production expenses.

The abrupt closure of De La Rue Kenya, following a protracted tax dispute with the Kenya Revenue Authority (KRA), has left questions lingering about the government's strategy for currency management.

The decision to relinquish control of this critical function to a foreign entity, without providing transparent details about the procurement process, has ignited concerns among financial experts and the public alike.

As the country awaits further clarification on the terms of the deal with the German printer, many are questioning whether this strategic shift aligns with Kenya's economic objectives and its commitment to supporting local industries.