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Growth in broad money supply


Money supply year on year has increased over the last decade though at a slow rate.

Money supply is the entire stock of currency and other liquid instruments circulating in a country's economy as of a particular time.

Various types of money supply are generally classified as M1, M2, M3 according to the type and size of the account in which the instrument is kept.

M1 contains physical money (paper and coins), checking accounts, demand deposits and negotiable order of withdrawals (NOW) accounts.

M2 includes all elements of M1, as well as savings deposits, money market securities, mutual funds and other time deposits.

M3 contains M2 as well as large time deposits, institutional money market funds, short term repurchase agreements and other larger liquid assets. It is used by economists to estimate the entire money supply within an economy, and by governments to direct policy and control inflation over medium and long-term periods.

Changes in M3 are as a result of changes in net domestic assets of the banking system which comprise; net foreign assets, domestic credit and other items net.

Broad money (M3) increased by Sh95.4 billion in 2016 compared to Sh328.2 billion in 2015.

This was the lowest increase over the last five years. The drop was attributed to the drop in quasi money by Sh177.4 billion in 2016.

Foreign currency deposits contracted by Sh12.5 billion over the same period.

However the increase in M3 was due to a Sh94.6 billion increase in credit advanced to the private sector and Sh17 billion credit to the public sector.