Foreign currency deposits in banks cross record Sh1 trillion
The value of foreign currency deposits in banks crossed a record Sh1 trillion in March as wealthy Kenyans and businesses sought a haven for their fortunes amid a relentless sharp fall in the shilling against major global currencies.
The value of foreign currency deposits in banks crossed a record Sh1 trillion in March as wealthy Kenyans and businesses sought a haven for their fortunes amid a relentless sharp fall in the shilling against major global currencies.
The latest data from the Central Bank of Kenya (CBK) shows that foreign currency deposits hit Sh1.058 trillion in March, a 7.19 per cent increase from Sh987.7 billion in February.
This comes at a time the Kenyan shilling has continued its slump against major world currencies which has boosted customers that hold cash in foreign currency in banks.
For instance, the shilling was trading at a mean of Sh132.33 against the US dollar on March 31 down from Sh126.85 on February 28.
This means that individuals and firms who had stashed dollars in their bank accounts by the end of February would get Sh5.48 more per dollar or 4.32 per cent more if they decided to convert their money into Kenyan shillings at the end of March.
The shilling yesterday traded at 137.95 against the dollar—extending the slump against the greenback.
Primarily owing to the weak shilling, the value of foreign currency deposits has been on a strong upward trend in recent months and has risen for three months in a row from December.
Growing external debt
The weak local currency has however been less kind to Kenya’s growing external debt which has risen sharply during the same period.
Kenya’s total debt hit Sh9.39 trillion in March including Sh4.53 trillion in domestic debt and Sh4.85 trillion in external debt.
Some 67.3 per cent of this external debt is denominated in US dollars, 20.6 per cent in euros, 5.3 per cent in yuan, 4.3 per cent in yen, and 2.3 per cent in sterling pounds.
To underline the impact of the weak shilling on foreign debt, the Kenya shilling depreciated against the US dollar by 4.3 per cent, the euro by 7.8 per cent, the yen by 7 per cent, the yuan by 5.3 per cent, and the sterling pound by 7.8 per cent in March alone.
During the month, external debt owed to bilateral creditors increased by Sh56.45 billion from Sh1.142 trillion to Sh1.198 trillion while multilateral debt increased by Sh29.95 billion from Sh2.21 trillion to Sh2.244 trillion.
Commercial debt increased by Sh52.71 billion from Sh1.185 trillion to Sh1.238 trillion during the same period.
At the same time, publicly guaranteed external debt marginally increased by Sh2.27 billion from Sh167.6 billion in February 2023 to Sh169.87 billion in March 2023.
“Overall, the national government’s external debt stock increased by Sh141.38 billion from Sh4.709 trillion in February 2023 to Sh4.851 trillion in March 2023. This was attributed to disbursements and repayments made during the month and in addition, the exchange rate depreciation,” said the Treasury in its latest monthly debt bulletin.
Demand for dollars locally has gone up significantly this year in line with surging imports following the full reopening of the economy, which has unleashed pent-up demand for both consumer and capital goods.
Global shocks sparked by Russia’s invasion of Ukraine have also increased the prices of imported commodities, driving up dollar demand. With the persistent decline, those holding dollars would be able to later convert their money to shillings at a gain or would not suffer conversion losses when importing.
