This archive report was first published on 29 November 2019.
As the Kenyan economy struggles with a cash crunch, the amount of cash in citizens' pockets has hit a six-year low. According to data from the Central Bank of Kenya (CBK), the cash circulating outside banks dropped to Sh157.7 billion in September, the lowest since April 2014.
The significant drop in cash in circulation comes as the economy faces job cuts, stagnant wages, and a slowdown in businesses. The biggest decline in cash circulating outside banks occurred in the four months leading up to September, with a Sh65 billion drop.
Interestingly, money in demand deposit accounts remained unchanged at Sh1.19 trillion in both May and September, suggesting that there was no shift in currency from people's pockets to short-term savings.
Analysts are puzzled by the drop, particularly given the CBK's announcement in October that notes worth Sh7.4 billion were not exchanged, rendering the cash invalid. This move has raised suspicions that the unexplained wealth tied to illicit activities may be a contributing factor to the decline in cash circulation.
This story was first published on November 29, 2019, in the Business Daily.
