Foreign currency deposits in Kenyan banks hit a record high in February as the depreciation of the shilling pushed up the value of dollar holdings.
The value of foreign exchange was recorded at KShs 804.31 billion in February against KShs 793.26 billion in January.
The Kenyan shilling depreciated to record lows against the greenback and other major currencies on a rapidly rising import bill that outpaced earnings from exports, diaspora remittances and the tourism sector.
The shilling averaged 115.44 units to the dollar on Thursday, after depreciating 2.03% from 113.14 at the start of the year.
The increase in foreign currency deposits has hurt local businesses which now struggle to make timely payments for shipments.
“Many of our members have had difficulty accessing US dollars from their banks to meet their international commitments in a timely manner… Market liquidity is essential to enable companies to focus on their core businesses of profitable production and ‘avoid panic buying,’ the Kenya Association of Manufacturers said last week.
The business lobby also raised fears of hoarding that prompted dollar liquidity constraints.
The shilling came under pressure as strong demand from importers, coronavirus-related disruptions and the Russia-Ukraine conflict prompted investors and businesses to seek safety in the dollar.
This means that businesses and individuals with dollar accounts protect themselves against further weakening by hoarding dollars or clinging tightly to reserves of greenbacks.
The value was recorded at KSh779.534 billion in February 2021, when the Kenyan shilling averaged 109.68 units against the dollar.
Foreign currency deposits jumped at Covid-19 peak in May 2020 to KSh671.45 billion.
The accumulation of foreign exchange is also explained by the improvement in exports and the gradual increase in exports, remittances and record tourism receipts as international travel resumes.