Dollar deposits in Kenyan bank accounts dropped for the first time in eight months in April after the dollar lost its strength against the shilling and companies and individuals made withdrawals to invest in an improving economy.
Latest Central bank of Kenya data shows that the value of foreign deposits stood at Sh762.7 billion in April down from Sh779.7 billion in March, the first drop since September last year.
Analysts say the small decline may be as a result of some drawdowns as the economy improved and companies resumed making investments rather than hold dollars.
“It is a small dip, of Sh16.9 billion which may indicate that there were some withdrawals,” Churchill Ogutu, head of research at Genghis Capital said.
Demand at home and in export markets had slumped for the better part of last year as consumers stayed indoors to avoid catching the coronavirus and because of government containment measures, forcing a freeze in investments plans.
In mid-April, the shilling also dropped to 106.8 units against the greenback following announcement that Kenya had secured a $2.34 billion loan from the IMF. This was a huge dip from the highs of 111 units versus the dollar witnessed at the end of last year that drove up the value of dollars held in local accounts.
“This is a sign the system is growing more comfortable with the exchange rate after it has stabilised and reserves were boosted thanks to the first installment of the IMF programme,” said Mohamed Abou Basha, the head of macroeconomic analysis at EFG Hermes.
The IMF programme and further funding from the World Bank have given confidence to the market that there will be ample dollar supply, staving off pressure that had weakened the shilling last year.
Expectations of a recovery this year has also seen more Kenyan companies gain confidence of reviving expansion plans after the third wave of coronavirus infections eased amid gradual uptake of vaccinations, raising hopes of progressive recovery in jobs.
Nearly a third of about 400 businesses surveyed in the monthly Stanbic Bank Kenya’s Purchasing Managers Index (PMI), conducted by UK researcher IHS Markit, said they plan to resume investment in business growth over the next one year.