Bank dollar deposits up by record Sh129 billion

Dollar deposits in bank accounts of rich Kenyans grew by Sh129 billion last year in a period the shilling declined sharply against the American currency and the wealthy stockpiled hard currency to protect their savings.

Latest Central bank of Kenya data shows that the value of dollar accounts stood at Sh740.6 billion in December a 21 per cent jump from Sh611.2 billion in January.

This is the first time dollar deposits have grown by more than Sh100 billion within a year partly aided by a 7.7 percent decline in the value of the shilling to exchange at 109.1 units against the greenback.

Kenya’s wealthy also tend to boost the value of their money in dollars when anticipating rough economic tides like now due to the effects of the coronavirus pandemic.

“Demand for dollars was primarily driven by the fact that the dollar is a safe haven but also around this time the US currency exchange rate was over the roof,” Churchill Ogutu, head of research at Genghis Capital said.

Mr Ogutu said the rise in dollar deposits may persist into this year since the coronavirus uncertainties that caused it have not gone away.

“The Covid-19 risks have not been fully smoothened out, we still have a risk of variant strains and multiple infections so the demand is likely to spill over into this year,” he said.

Rich individuals, banks and private firms are protecting their value and hedging rather than seeking new areas in which to invest their fortunes.

The rise in foreign currency bank deposits has also emerged in a period when Kenya imposed tough restrictions that slowed down the economy and subsequent demand for spending.