Dollar deposits in Kenyan bank accounts fell for the first time in eight months in April after the dollar lost strength against the shilling and businesses and individuals made withdrawals to invest in an improving economy.
The latest data from the Central Bank of Kenya shows that the value of foreign deposits rose to Sh 762.7 billion in April, down from Sh 779.7 billion in March, the first drop since September of last year. .
Analysts say the slight drop may be due to some withdrawals as the economy improves and companies have returned to investing rather than holding dollars.
“It’s a small drop of 16.9 billion shillings which may indicate that there have been withdrawals,” said Churchill Ogutu, head of research at Gengis Capital.
Domestic demand and in export markets had collapsed for most of last year as consumers stayed indoors to avoid catching the coronavirus and due to government containment measures, forcing a freeze on investment plans.
In mid-April, the shilling also fell to 106.8 units against the greenback following news that Kenya had secured a $ 2.34 billion loan from the IMF. This is a significant drop from the highs of 111 units against the dollar seen late last year, pushing up the value of dollars held in local accounts.
“This is a sign that the system is becoming more comfortable with the exchange rate after it stabilizes and reserves have been increased thanks to the first tranche of the IMF program,” said Mohamed Abou Basha, head of the IMF. macroeconomic analysis at EFG Hermes.
The IMF program and additional funding from the World Bank have given the market confidence that there will be a plentiful supply of dollars, avoiding the pressure that weakened the shilling last year.
Expectations of a recovery this year have also seen more and more Kenyan companies regain confidence in their expansion plans after the third wave of coronavirus infections eased against a backdrop of gradual vaccination, raising hopes of a gradual resumption of employment.
Almost a third of the roughly 400 companies polled in Stanbic Bank Kenya’s Monthly Purchasing Managers Index (PMI), conducted by UK researcher IHS Markit, said they plan to resume investment in growth companies over the next year.