Money Circulation Hits a Record High Of Sh261.5B in July – CBK

Money circulating in the economy hit a record high in July, reflecting increased spending power even as politicians loosened the purse strings and splashed the cash on campaigns just days before the hotly contested August 9 polls.

Latest statistics from the Central Bank of Kenya (CBK) show currency outside banks that is the amount in the hands of consumers  hit Sh261.5 billion in July.

This is the largest amount of money circulating outside banks in a month since the CBK started to publicly release the data.

It is also a 6.5 percent increase from the Sh245.5 billion cash that was circulating in June, which shows that Sh16 billion was released into the economy in a month.

“The net increase of currency in circulation has attributed to higher currency outflows (withdrawals) compared to the net inflows (deposits),” said CBK.

The data shows time deposits, that is the amount of savings that mature for withdrawal at a specified time, fell by Sh53 billion during the period releasing more cash into circulation.

The high cash circulation hints at the increased spending frenzy in the months leading up to the polls as politicians ramped up the purchase of campaign items such as branded t-shirts, caps, vehicles, and sound systems as well as pay staff and rally attendees.

It also signals increased spending amid a high cost of living that has seen prices of basic commodities such as food, water, fuel, electricity, and rent go up.

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).

Businesses are also borrowing more to inject cash into their operations to support their recovery efforts from the Covid-19 pandemic as well as expand their operations.

The CBK data shows the value of loans issued to the private sector hit Sh6 trillion for the first time in July, up from Sh5.89 trillion in June.

Out of this, while 82.6 per cent (Sh4.97 trillion) was lent to businesses in various sectors of the economy, 17.4 percent (Sh1.04 trillion) was lent to private households.