The dollar deposits in the bank accounts of affluent people increased by Sh129 billion in 2020. It was during a period whereby the shilling weakened against the American currency
The latest Central bank of Kenya data illustrates that the value of the dollar accounts as of December 2020 was Sh740.6 billion, which was a 21 percent increase from January’s Sh611.2 billion.
For the very first time, the dollar deposits have increased by more than Sh100 billion within a year despite the 7.7 percent decrease in the value of the Kenyan shilling to exchange at 109.1kshs against the dollar.
The Kenyan affluent population boosts the value of their money in dollars when they expect the hard economic seasons such as the Covid-19 pandemic.
“Demand for dollars was primarily driven by the fact that the dollar is a safe haven but also around this time the US currency exchange rate was over the roof,” Churchill Ogutu, head of research at Genghis Capital stated.
“The Covid-19 risks have not been fully smoothened out, we still have a risk of variant strains and multiple infections so the demand is likely to spill over into this year,” he added.
According to Mr. Ogutu, the increase in the dollar deposits may continue due to the unpredictability of the pandemic.
The affluent individuals, private firms as well as banks are currently hedging and protecting their value compared to looking for new investment avenues.
The increase in foreign currency bank deposits surfaced during the period of tough restrictions that negatively affected the economy.