The cash had jumped to an all-time high of Sh253.5 billion in December, Central Bank of Kenya (CBK) data shows, before retreating to Sh245.1 billion in January.
The December spike came as Kenyans bulked up on cash for festive spending and payment of January school fees.
Despite the dip in January, the amount of cash in circulation still remains higher compared to the other months of 2021 save for December, reflecting the continued recovery of the economy.
The amount of cash circulating outside banks fell by Sh8.4 billion in January, reflecting reduced spending activity among Kenyans after the spike during the December festivities.
The cash had jumped to an all-time high of Sh253.5 billion in December, Central Bank of Kenya (CBK) data shows, before retreating to Sh245.1 billion in January.
The December spike came as Kenyans bulked up on cash for festive spending and payment of January school fees.
“The increase in December was due to festivities, which raise usage of money in the economy, but come January, that demand is not there. There is some cyclicality to it,” said Churchill Ogutu, an economist at IC Asset Managers (Mauritius).
Despite the dip in January, the amount of cash in circulation still remains higher compared to the other months of 2021 save for December, reflecting the continued recovery of the economy.
Improved consumption brought by increased confidence and income as a result of new hirings and removal of containment measures aimed at combating the pandemic have lifted the economy, thereby increasing disposable income.
Global geopolitical concerns due to the Russia-Ukraine conflict are however likely to impact the amount of disposable income in Kenyan hands, especially due to rising food and energy prices that have hit household budgets hard.
During January, the amount of demand deposits — cash in banks that is available for withdrawal — retreated by Sh45 billion to Sh1.453 trillion from an all-time high of Sh1.498 trillion in December 2021.
This indicates redirecting of cash to fund investments that had been put on hold due to Covid-19 when many opted to retain cash as a buffer against the ensuing economic uncertainty.
Some of the funds were also redirected to long-term interest-earning deposits, which rose by Sh9.1 billion to Sh1.593 trillion in January. Dollar deposits held in local banks also dipped during the month by the equivalent of Sh10.4 billion to Sh793.3 billion, coinciding with a seasonal fall in remittances and rising import costs.
