By Kepha Muiruri
New data from the Central Bank of Kenya (CBK) shows that corporate deposits have been on the increase as foreign currency deposits hit Ksh.891.5 billion in the six months from Ksh.760.3 billion previously.
“The corporate deposits increased by 6.8 per cent compared to a decline of 1.3 per cent in the previous quarter (January-March 2022), partly reflecting recovery in economic activities,” noted the CBK.
“Expansion in corporate deposits was largely recorded in demand and foreign currency deposits category.”
The second quarter of 2022 saw increased demand for hard currency, especially among importers and merchant traders against soaring global commodity prices including fuel and wheat.
Foreign currency deposits have been on growth trajectory over the past year increasing by 1.2, 4.4, 0.9 and 9.9 per cent in the respective quarters since June last year.
Besides the rising global commodity prices which have required firms to hold significant hard currency reserves, rising interest rates in developed economies have incentivised investments in US dollar-denominated assets.
The combination of higher interest rates and renewed global uncertainty has sent the US dollar on a tear against other world currencies with the dollar index hitting an all-time record high last week to mirror the stronger green buck.
On the flipside, the Kenyan Shilling has been on the receiving end of a stronger dollar to post losses of 6.4 per cent in the year to date with the local currency changing hands for the US dollar at Ksh.120.40 on Monday.
The stronger dollar has piled pressure on the country’s store of official reserves at the CBK which currently stand slightly above the prescribed statutory lower limit of four months-import cover.
Additional data from the CBK shows the reserves closed last week at Ksh.884.5 billion ($7.346 billion) or an equivalent 4.19 months import cover.
The CBK deploys the reserves primarily in meeting Kenya’s external debt payments.
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