Foreign deposits were the equivalent of Sh461.9 billion at the end of July—a week before the elections — compared to Sh404.3 billion at the end of December 2016.
The annual growth in the deposits at the end of July stood at 13 per cent, which was the highest recorded in the previous 12 months.
While the foreign reserves in banks have gone up, those at Central Bank have come under pressure in recent months.
The amount of money held in foreign currencies in local banks rose by Sh57.6 billion in the seven months to July, indicating heightened dollar accumulation by businesses and individuals ahead of the August 8 General Election.
Latest data from Central Bank of Kenya (CBK) shows that foreign deposits were the equivalent of Sh461.9 billion at the end of July—a week before the elections — compared to Sh404.3 billion at the end of December 2016.
The annual growth in the deposits at the end of July stood at 13 per cent, which was the highest recorded in the previous 12 months.
In the period leading up to the elections, the shilling came under pressure as businesses built up their dollar positions, while some also scaled back trade to wait and see how the situation would pan out in the aftermath of the bitterly contested polls.
“The 13 per cent rise in foreign currency deposits could be mainly attributed to individuals and businesses stocking up dollar holdings due to political uncertainties that had crowded the economy at the time,” said Kingdom Securities senior analyst Mercyline Gatebi.
“In addition, this could be a signal of a slowdown in business activities during the electioneering period as most businesses used to making payments in foreign terms were not active, hence holding higher foreign currency deposits.”
While the foreign reserves in banks have gone up, those at Central Bank have come under pressure in recent months.
This is partly attributed to the interventions the regulator has had to make in the market to keep the shilling stable, servicing of Kenya’s foreign debt obligations and revaluation losses.
In mid-November, the CBK reserves stood at $7.1 billion (Sh735 billion), equivalent to 4.72 months of import cover, compared to a record high of $8.3 billion (Sh859 billion) or 5.49 months of cover at the beginning of May.
“What has given the local unit stability in the aftermath of the elections is mainly CBK interventions and not necessarily the fundamental support obtained from external and internal factors. I would therefore expect the shilling to strengthen gradually”
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