On Thursday, October 20, President Uhuru Kenyatta lifted the dusk to dawn nationwide curfew in a move that many lauded for reopening a struggling economy.
For more than a year, Kenyans watched helplessly as their sources of income, including jobs and businesses collapsed.
As Kenyans worked day and night to get the economy back on its feet, a new trend emerged in the country – a spike in the number of dollar accounts. Speaking to Kenyans.co.ke on Tuesday, November 16, Ken Gichinga, Chief Economist, Mentoria Economics, explained the emerging trend in the uptake of dollar accounts.
Available in most tier one banks, these accounts are current or savings accounts which operate using only one currency – the dollar. Depending on individual bank rates and terms, any Kenyan can open such accounts provided they are eligible.
Gichinga attributed the increase in the number of Kenyans opening dollar accounts to various factors, among them a rise in global trade and growth in the diaspora population.
"These days, people do a lot of business with international firms. For instance, there is a big importing community whose main currency of trade is the dollar," he stated.
He further explained that it is safer for those engaged in international business to run dollar accounts to avoid risks related to exchange rates due to fluctuation. However, those holding dollar accounts may not enjoy the same advantage.
The economic expert added that individuals who look at trading using the dollar locally will most likely experience a currency match. Citing an example, he stated that the tenants and management of a mall in Kenya fell out because the latter wanted the rent paid in dollars while the former sold goods in Kenyan shillings.
Gichinga further debunked a myth that opening dollar accounts would cushion Kenyans from inflation. He argued that the Central Bank of Kenya is committed to cap inflation of the shilling.
"CBK has an inflation target policy where it is supposed to cap it at 5%. It is, however, allowed a 2.5% allowance which allows it to get to a 2.5% of 7.5%," he explained.
He further assured that Kenyans are safer with the shilling stating that America was also concerned about inflation, which is higher (6.2 percent) than that of Kenya (5.2 percent). He added that increased trade witnessed between Kenya and other countries would also play a role in capping the inflation.
Furthermore, he noted that the current influx in opening of dollar accounts would only polarize the economy.
