The value of cash circulating outside the banking system rebounded in February to a record high of Sh231.37 billion on increased recovery optimism at the start of the year.
Fresh data by the Central Bank of Kenya (CBK) shows that the value of currency outside the banking system — which is an indicator of the prevailing economic activity — has continued to defy Covid-19 economic hardships to grow by two percent in February from Sh226.7 billion in January.
This growth has, however, failed to better the lives of most Kenyans who have been ravaged by the economic fallout of the pandemic.
A recent survey by the Kenya National Bureau of Statistics (KNBS) reported that 1.72 million adult Kenyans were jobless and actively seeking a Job as at the end of September last year, with most of them having been laid off in the pandemic-ravaged year.
With the unemployment rate at 7.2 percent in September, many Kenyans have been battered by the disease, leaving them struggling to pay rent, afford a meal or meet their daily needs. This has revealed a paradox where cash in circulation continues to rise.
“Because of the pandemic, most Kenyans are continuously being forced to save or redirect their spending mainly because of the containment measures,” Ken Gichinga, the chief economist at Mentoria Economics said.
“Reduced consumption brought by income shocks as a result of pay cuts, job losses, and end of tax reliefs has led to general slowdown in the economy, opportunities mainly because of the curfews and other measures; as a result, more cash is being stored in deposit accounts and less is being spent, causing a leakage in the circular flow of income,” he added.
Many Kenyans remain hard pressed after the government earlier this year reversed a chain of relief measures it had set to cushion households and businesses from the economic fallout of the pandemic.
Charges on mobile phone-based transfers of small amounts of cash were returned at the end of last year, having been removed in March 2020 to encourage cashless transactions and curb the spread of the virus.
The government in January also reversed payroll and income tax cuts that it unveiled last April to raise demand in the wake of the economic shocks caused by Covid-19.
Further, the CBK on March 2,2021 ended the restructuring of loans for borrowers hit by the virus. Parliament in March 2020 unveiled the initiative to help troubled borrowers and cushion the economy.