The Kenyans’ foreign money deposits in the local banks fell by about Sh2.6 billion in the month of July. This indicates an increase in consumption by the importers, who increased holdings belonging to them in June.
According to Kenya National Bureau of Statistics (KNBS) statistics, value of the currency deposits was Sh757.73 billion by July, which fell from Sh760.34 billion by the month of June. Kenya’s import bill increased by 10.6 percent month on month in July, reaching Sh177.2 billion from Sh160.2 billion in June.
Fuel, industrial products, and machinery cost and volume increased, resulting in a larger import bill. Given that the diaspora remittances of Sh37.1 billion ($336.7 million) were 9.1 percent higher in July than in June, and the shilling weakened by the month, averaging 108.15 units to the dollar compared to 107.80 units in June, the deposits would have likely continued to rise, if not for the higher import costs.
When the pandemic struck Kenya 18 months ago, hard currency reserves had stayed elevated, owing to hedging against possible shilling weakening and lower import spending as the economy slowed.
The deposits kept rising when the government announced more restrictions to battle the Covid infection, reaching the highest at Sh779.7 billion during March. A lower shilling boosted the value of these deposits in the local currency.
Analysts linked the increase in June to concerns over the spread of the Delta variant and deposit mobilization as the second quarter came to a close.
The CBK had previously stated that bankers and companies had notified that investors were stockpiling dollars for speculative purposes in the aftermath of expectations that the shilling would remain weak versus the dollar.
Concerns over the Covid version have subsided, with the country receiving an increased supply of different vaccines and the positive rate decreasing below 10% in the past few days.