Kenya: Foreign currency bank deposits hit all time high

Foreign currency deposits in local banks in Kenya hit an all-time high in February as the depreciating shilling boosted the value of dollar holdings. The value of foreign currency was registered at 804.31 billion Kenyan shillings in February from 793.26 billion Kenyan shillings in January. The shilling has depreciated to record lows against the greenback and other major currencies on the back of a fast-rising import bill that has outstripped earnings from exports, diaspora remittances, and the tourism sector. Kevin Ngige, senior equities analyst at Genghis Capital, shed light on the factors contributing to this surge in foreign currency deposits and the challenges faced by local businesses in an interview with CNBC Africa. Ngige highlighted the impact of the upcoming general elections, subdued exports, and reliance on foreign debt on the stability of the Kenyan shilling. The imbalance in trade, where imports exceed exports threefold, has further strained the economy, with measures like spreading out dollar payments for imports causing cash flow problems for local investors. The fuel crisis compounded by the rising prices of crude oil in international markets has added to the government's woes, as dwindling forex reserves pose a challenge in maintaining stability in the currency. Amid global shifts away from the US dollar, Ngige suggested diversifying currency reserves to include the Chinese yuan to reduce reliance on the greenback. The uncertain economic outlook ahead of the elections and the ongoing challenges in managing forex reserves continue to cast a shadow on Kenya's economy.