An Abrupt End to the Penny

WASHINGTON D.C. – Businesses across the United States are grappling with a growing shortage of one-cent coins, known as pennies, following a decision by President Donald Trump's administration to cease their production. The move, announced earlier this year, has led to practical challenges in daily commerce and has forced retailers to implement new strategies for cash transactions.

On Sunday, February 9, 2025 (EAT), President Trump announced via social media that he had instructed the U.S. Treasury to stop producing the penny, citing its excessive production cost. "For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful!" he stated. According to the U.S. Mint's 2024 annual report, each one-cent coin cost nearly 3.7 cents to produce and distribute, largely due to the rising price of zinc. The production halt is expected to save the U.S. government an estimated $56 million annually.

Following the presidential directive, the U.S. Treasury Department confirmed on Thursday, May 22, 2025 (EAT), that the U.S. Mint had placed its final order for "penny blanks"—the metal discs used to mint the coins. Production is set to officially end when the current supply of blanks is exhausted, which is anticipated in early 2026. While the Treasury has the authority to decide the volume of coins to mint, only the U.S. Congress can formally eliminate a denomination, meaning the penny remains legal tender.

Shortage Hits Sooner Than Expected

Although the Treasury Department had initially projected that shortages would not become a significant issue until early 2026, retailers and banks began reporting difficulties in obtaining pennies as early as late August 2025. "We first heard about the issue in late August, early September," Dylan Jeon, Senior Director of Government Relations with the National Retail Federation (NRF), confirmed in a statement on Friday, November 1, 2025 (EAT). "It’s really impacting any business that deals with cash payments."

The shortage stems from the fact that banks can no longer source new pennies from the federal government to distribute to businesses. The Federal Reserve has suspended penny services at many of its coin distribution terminals, exacerbating the problem. The issue is compounded by the low circulation rate of the estimated 114 billion pennies already in the public's hands; many are stored in jars or lost rather than being used in transactions.

Retailers Forced to Adapt

In the absence of federal guidelines, businesses have been left to devise their own solutions. The most common practice is rounding cash sales to the nearest five cents. However, this has created legal and financial challenges. In some jurisdictions, local laws require retailers to provide exact change. To avoid potential lawsuits for rounding up, many businesses are choosing to round down, absorbing the loss of up to four cents on every cash transaction. "That adds up really quickly," noted Mr. Jeon of the NRF.

Some companies have launched promotions to encourage customers to bring in their stored pennies. Convenience store chain Sheetz, for example, offered a free soda to customers who brought in 100 pennies. These measures highlight the logistical scramble faced by retailers in a suddenly penny-less economy.

Global Context and Relevance for Kenya

While the discontinuation of the U.S. penny has no direct, immediate impact on the Kenyan economy or the Shilling, the development is significant in a global context. The U.S. dollar is the world's primary reserve currency, and any change to its physical composition is noteworthy. This move follows a global trend where countries have eliminated low-value coins due to inflationary pressures and rising production costs. Canada, for instance, stopped distributing its penny in 2013, and Australia and New Zealand eliminated their one and two-cent coins decades ago.

For Kenya and other East African nations, this event serves as a case study in currency management. As economies continue to digitize and the cost of minting low-denomination coins rises, central banks worldwide, including the Central Bank of Kenya, may face similar decisions in the future. The challenges faced by U.S. retailers in adapting to a system of rounding provide valuable lessons on the importance of clear government guidance and public communication during such a transition. The shift also underscores the broader global movement towards digital payments, where exact amounts can be processed without the need for physical change. No specific economic impact on Kenyan trade, remittances, or currency reserves has been identified from this policy change. FURTHER INVESTIGATION REQUIRED.