A bank vault .[Getty Images] In July last year when millions had lost their jobs due to the adverse effects of the Covid-19 pandemic, the Central Bank of Kenya (CBK) issued a number of Treasury bonds seeking to raise a combined Sh100 billion.
The response from investors bellied the grim state of the economy.
For the reopened five and 10-year Treasury bonds – long-term government security – in which CBK at the behest of the National Treasury sought to borrow Sh40 billion from local investors, the regulator received bids totalling Sh105.1 billion. READ MORE
This translated into an oversubscription rate of 262. 8 per cent.
In the same month, CBK floated three other Treasury bonds seeking to raise Sh60 billion. It received Sh181.8 billion in bids, three times what the CBK had issued.
This, in effect, went to show there was a lot of money in the economy.
Since Kenya recorded its first case of Covid-19 in March last year, the economy has experienced a sharp downturn, resulting in the untimely death of several businesses.
Airlines, hotels, pubs, nightclubs and transport companies were buckling under the weight of the stringent containment measures aimed at curbing the spread of the Covid-19 pandemic.
The stock market was bleeding, with foreign investors cashing out in droves from the Nairobi Securities Exchange (NSE).
This capital flight, coupled with dwindling tourist receipts and export earnings, devastated the country’s foreign exchange reserves. The exchange rate also went on a downward spiral.
Spooked by the adverse effects of the pandemic on the business environment, rich individuals and businesses frantically stashed an additional Sh174.5 billion in fixed deposit accounts by the end of June, according to CBK data.This pushed up the fraction of money in fixed deposit accounts in various banks to Sh1.6 trillion, an increase of 12 per cent from the Sh1.42 trillion in March last year.This means that on average, an additional Sh11.6 billion was put in time-saving accounts every month since March last year as rich individuals and firms sought to protect their wealth.Others who had a stake in this pot of cash were pension funds, insurance companies and parastatals.The rich also converted much of their wealth into dollars, with money in foreign deposit accounts rising by Sh137.5 billion to Sh779.7 billion in March this year before it declined slightly to Sh760.3 billion.Some of the money came from the government. In a bid to inject some liquidity into the economy, the National Treasury […]