Foreign currency deposits held by Kenyans in local banks rose 18.6 per cent to Sh569.6 billion by end of November 2018 compared to Sh480.3 billion the same period in 2017, boosted by higher diaspora remittances.
Latest Central Bank of Kenya (CBK) data on money supply in the economy shows the deposits have held above the Sh500 billion mark since May, touching an all-time high of Sh580.8 billion in June 2018.
They were partly pushed up in the middle of the year by the expiry of the deadline of a tax amnesty on repatriating of assets held abroad, which has since been extended to June this year.
The central bank has also attributed the recent rise in the foreign currency deposits to the sharp increase in ordinary remittances sent back home by Kenyans living abroad, saying banks have introduced new products targeting the diaspora that have been effective in growing volumes.
Kenyans living abroad sent home Sh270 billion last year, up from Sh195 billion in 2017, while income from other forex sources such as horticulture and tourism rose significantly as well.
“Remittance inflows increased significantly in 2018, supported by reduced costs as banks leverage on technology (transfers terminating on peoples’ mobile phones) and an increase in Kenyan emigrants,” said the CBK following the January 29 Monetary Policy Committee meeting.
“Travel receipts increased by 31.5 per cent in 2018 reflecting increased tourism arrivals for holiday and business purposes on account of political stability, improve security and revitalised marketing.”
Kenyans also spent less foreign exchange on the import side, especially on food due to improved weather.
The fall in the price of oil towards the end of the year also meant lower greenback demand from the system by oil marketers.
These importers are normally some of the biggest users of dollars in the market, given that petroleum products account for more than 15 per cent of Kenya’s total import bill.
This year, banks are still reporting that dollar demand has sometimes failed to match up to inflows, hence the continued strengthening of the shilling against the US currency.