Kenyans are converting their dollars into shillings to take advantage of the huge windfall over the last eight months where the shilling has weakened from 100 units to 108 units to the greenback.
At the end of January, Kenyans with dollar accounts had $6.1 billion whose value has grown from Sh611.2 billion to Sh661 billion, a Sh50 billion increase as a result of the depreciation alone.
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Now for the first month this year, the amount of money in dollar accounts reduced from Sh671.4 billion to Sh662.3 billion as Kenyans redeemed their dollars’ worth of windfall.
Kenyans see this as a great opportunity to take advantage of the shilling weakness which is seen to be pushed primarily by temporary macroeconomic conditions.
There has been an increase in dollar demand to cover for imports which are beginning to pick up as the economy opens up.
Safaricom is also buying dollars ahead of the Sh56.09 billion dividend to its foreign shareholders, leading in corporate demand to finance dividend payments.
On the supply side, dollar inflows have been muted after heavy inflows of COVID-19 loans and grants from the Africa Development Bank (AFDB), IMF, World Bank and Euro countries.
Kenyans converting their dollars to shilling also goes to show they have confidence that the Central bank of Kenya will not allow the shilling to weaken further and do not want to miss out when the shilling strengthens again.
CBK is using some of its reserves to help ease some of that seasonal pressure which has seen forex reserves dip from $9.717 billion in July to the current $9.24 billion.
The Apex Bank also issued a Sh70 billion infrastructure bond, a tax-free government paper that tends to attract dollar inflows from interest by foreign buyers.