The Central Bank of Kenya (CBK) has reported that wealthy people and companies have accumulated Ksh779 billion cash held in foreign currencies.
According to the recent report by CBK, the bank noted that in 2020 the amount increased by Ksh137 billion, the highest annual jump.
The previous year, the amount had increased by only Ksh49 billion to hit Ksh625 billion.
Economic analysts have explained that the rush to store money in foreign currencies such as the dollar is meant to protect the value of the cash.
The shilling is currently trading at a little above Ksh107 against the dollar which has been weakening as compared to past years.
The shilling weakened by 5.73% against the dollar in March 2021 compared to February 2020
When the shilling continues weakening, the value of the cash held by the rich individuals and companies also plummets.
“The confidence in local currency is even weaker than it was about a year ago, especially looking at the nuances such as growing debt levels,” commented Kenneth Minjire a senior associate at AIB-AXYS Africa.
Wealthy Kenyans and companies have also been hoarding huge amounts of cash fearing to invest in the slumping economy.
“It now pushes banks to try and find more ways of employing these funds for a return given the tight rules around dollar lending,” Minjire added.
In terms of local currency, Kenyans are holding a total of Ksh4.03 trillion, translating to a 12% jump from Ksh3.55 trillion.
This means that Kenyan households and businesses were on average adding Ksh1.32 billion daily on their deposits, up from Ksh61.5 million that was being recorded in 2019.
