Foreign currency deposits remained high but fell slightly to Sh577.9 billion in May compared to Sh578.9 billion in April, which was close to the same level in March, Central Bank of Kenya (CBK) data shows.
The changes in the three-month period indicated the deposits had stabilised after hitting an all-time high of Sh586.6 billion in January. Between April and May, the decline was marginal at 0.2 percent.
Most of the deposits are related to the rising remittances but there are also deposits tied to the amnesty on stashed funds that was last year extended to June this year.
Remittances stood at Sh243.2 billion as at the end of May, the same month as that for the data on foreign currency deposits.
However, remittances stood at Sh295.3 billion as at the end of June, but the CBK is yet to publish the June data on the deposits.
The deposits first hit all-time last year following the 2017 declaration of the amnesty that was to run up to June 2018 for those who had stashed funds abroad to bring them back.
However, the amnesty was extended to June this year with the sweetener that those who brought in the money would not face prosecution under the Economic Crimes Act or money laundering laws.
In its meetings, the central bank’s Monetary Policy Committee (MPC) has been pointing to the increased inflows, including remittances and exports that have stabilised the currency.
“The foreign exchange market has remained stable … This reflects resilient performance of exports particularly horticulture and coffee, strong diaspora remittances, and higher receipts from tourism and transport services,” said the MPC in its May report.
The MPC further noted that the gap between imports and exports had narrowed indicating that more forex had been left in the hands of commercial banks.
In an earlier interview, Standard Investment Bank research analyst Eric Musau said while it was difficult to determine the relative importance of different factors, foreign direct investment, remittances and exports must have contributed to the forex deposits in banks.
“We have had a lot of inflows. I don’t know the relative strength of the factors leading to this, but they included diaspora remittances, new investments in Kenya and flows from exports such as in agriculture and horticulture,” said Mr Musau.