Kenyans raise forex deposits by Sh31bn to tame imports bill

Kenyans piled up foreign currency deposits in commercial banks last year by Sh31 billion ($301 million) to avoid paying a stiff price for dollar-denominated expenses later.

According to the latest monthly report of the Central Bank of Kenya (CBK), the total holdings of forex by local residents stood at Sh448 billion ($4.38 billion) in August compared to Sh417 billion ($4.08 billion) at the beginning of the year.

Analysts have pointed out that Kenyan importers, especially contributed to the weakening of the shilling in August and September as they accumulated forex in their accounts so as to pay a lower price for dollar-denominated imports.

Kenyan residents’ stranglehold on foreign exchange is even tighter than that of the lenders. The banks, excluding the CBK, hold Sh229 billion worth of forex — Sh219 billion less than that of individuals and companies.

“Foreign exchange reserves held by commercial banks increased to $2,302 million at the end of August 2015 from ($1,843 million) at the end of 2014. During the same period, residents’ foreign currency deposits increased to $4,381 million from ($4,080 million),” said the CBK.

Although they held lower amount than the individuals and companies, the commercial banks increased their holdings of forex by a higher Sh47 billion in the year to August, to Sh235 billion.

At the height of the shilling depreciation in September, a head of a commercial bank’s treasury said Kenyans’ purchase and hoarding of hard currencies was driven by fear that it would be even more expensive to buy the dollar later.

“What people are trading on is the future. They don’t see a recovery in the value of the shilling. They only see it weakening, so they are trying to protect themselves by buying and depositing in their accounts well before the goods’ purchase date,” said the manager.