This archive report was first published on 7 December 2019.
According to the Central Bank of Kenya (CBK), the country's corporates and wealthy individuals are holding onto a staggering Sh1.41 trillion in cash reserves, a significant amount in a soft economy.
As the economy struggles with a cash crunch, the CBK notes that investment options are becoming increasingly limited, leading the rich to opt for foreign currency savings. This trend is reflected in the growth of foreign currency fixed deposits, which rose from Sh553.2 billion to Sh625.3 billion in just two years.
The CBK's data also reveals that the cash in circulation outside banks has decreased, standing at Sh227 billion in October, down from Sh269 billion in the same month last year.
Experts point out that high-net-worth investors and companies with billions of shillings in fixed accounts have chosen not to invest in expanding their businesses or starting new ventures, citing lower sales and returns.
Notably, the cash in banks fixed deposits accounts now equals the annual tax collections by the Kenya Revenue Authority (KRA).
As Jibran Qureishi, regional economist for East Africa at Stanbic, notes, 'The future output sub-index still indicates that firms are cautious on activity over the coming year.'
Since 2017, Kenya has faced a series of economic challenges, including a bruising General Election and a repeat presidential election, which have led to reduced investments, hiring plans, and job cuts.
