Foreign currency deposits in local banks hit an all-time high in February, as the depreciating shilling boosted the value of dollar holdings.
The value of foreign currencies was registered at Sh804.31 billion in February from Sh793.26 billion in January.
The shilling has depreciated to record lows against the greenback and other major currencies on the back of a fast-rising import bill that has outstripped earnings from exports, diaspora remittances and the tourism sector.
The shilling was exchanging at an average 115.44 units to the dollar on Thursday, having depreciated by 2.03 percent from 113.14 at the start of the year.
The rise in foreign currency deposits has hurt local businesses that are now struggling to make timely payments for shipments.
"Many of our members have had challenges accessing US dollars from their banks to meet their international commitments in a timely manner... Liquidity in the market is critical to allow businesses to focus on their core activities of cost-efficient production and avoid panic buying,” the Kenya Association of Manufacturers said last week.
The business lobby also raised fears of hoarding that have prompted the dollar liquidity constraints.
The shilling has been under pressure due to high demand from importers, the coronavirus disruptions and the Russia and Ukraine conflict that have prompted investors and companies to seek safety in the dollar.
This means firms and individuals with dollar-based accounts are hedging against further weakening by stocking up dollars or holding on tightly to greenback reserves.
The value was recorded at Sh779.534 billion in February 2021 when the Kenyan shilling averaged 109.68 units against the dollar.
Deposits in foreign currency deposits jumped at the peak of Covid-19 in May 2020 at Sh671.45 billion.
The piled-up foreign currency was also on the back of improved exports and gradually rising exports, record-high remittances and tourism receipts as international travel recovers.