Currency in circulation hits a record of Sh261.5 billion
Currency in circulation hits a record of Sh261.5 billion in July, reflecting increased spending power.
The amount of money moving through the economy reached a record high in July, suggesting increasing purchasing power even as politicians relaxed their spending restrictions and poured money into campaigns just days before the highly contested elections on August 9.
According to the most recent statistics from the Central Bank of Kenya (CBK), the amount of money held by customers outside of banks reached Sh261.5 billion in July.
Since the CBK began making the data available to the public, this is the most money that has been moving outside of banks in a single month.
Additionally, it represents a 6.5% rise from the Sh245.5 billion in cash that was in circulation in June, indicating an Sh16 billion monthly release into the economy.
“The net increase of currency in circulation was attributed to higher currency outflows (withdrawals) compared to the net inflows (deposits),” said CBK.
According to the data, time deposits—a measure of savings that become available for withdrawal at a specific time—fell by Sh53 billion during the period, allowing for an increase in the quantity of currency in circulation.
The high cash flow is an indication of the increased spending binge that politicians engaged in in the months leading up to the election, when they increased their purchases of campaign-related goods like branded t-shirts, caps, vehicles, and sound systems as well as paying staff and rally attendees.
Additionally, it denotes higher expenditure amid rising costs of living for necessities including food, water, gasoline, electricity, and rent.
The high cost of living has forced more Kenyans to rush to banks, digital lenders, shylocks, and other lenders to request loans to meet basic spending needs even as others borrow for income-generating ventures.
Inflation hit a 63-month high of 9.2 percent in September.
“The rise in inflation was largely due to increase in prices of commodities under food and non-alcoholic beverages (15.5 percent), transport (10.2 percent) and housing, water, electricity, gas and other fuels (7.3 percent),” said the Kenya National Bureau of Statistics (KNBS).
Additionally, businesses are taking on more debt in order to increase their cash flow and help their recovery from the COVID-19 pandemic.
According to CBK data, private sector loans extended in July reached Sh6 trillion for the first time, up from Sh5.89 trillion in June.
Of this, 17.4% (Sh1.04 trillion) was lent to private households, with the remaining 82.6% (Sh4.97 trillion) going to businesses operating in various economic sectors.
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