Cash in bank tills drop by Sh10 billion

Banknotes. [Wilberforce Okwiri, Standard]

Cash in the tills of banks reduced by Sh9.7 billion in January this year, an indicator that individuals and traders were withdrawing more money to be used to fund activities in the economy.

Data from the Central Bank of Kenya (CBK) shows that cash in the tills of banks reduced by 17 per cent, from Sh56.8 billion in December last year to Sh47.1 billion in January 2021.

This was a decline since January last year when money that lenders had in their tills dropped by Sh10.6 billion or 17.6 per cent. By January this year, the economy had begun to pick up with traders restocking, in an anticipation of a rebound in demand, which had been depressed by the Covid-19 pandemic.

Demand deposits or money in the bank accounts that can easily be accessed also dropped by Sh5.9 billion, an indicator of increased spending in the economy.

However, this uptick in economic activities is likely to be disrupted by the additional containment measures announced by President Uhuru Kenyatta in light of the third wave of Covid-19 infections.

“Whereas the foregoing measures will have adverse effects on the economy and constrain our usual way of life, the measures are temporary and necessary to contain the spread of the disease and therefore stop further loss of lives,” said President Kenyatta in his 15th presidential address on coronavirus pandemic last Friday.

The President restricted movement into five counties - Nairobi, Nakuru, Kiambu, Machakos and Kajiado, noting that 70 per cent of Covid-19 infections were in this zone.

Mr Kenyatta also revised the dusk-to-dawn curfew from 10pm to 4am to between 8pm and 4am, which reduces the business working hours.

Operation of nightclubs and pubs was suspended while hotels and restaurants would be prohibited from selling alcohol. Hotels and restaurants could also only sell takeaway meals even as the Head of State banned all kinds of social and political gatherings.

Money supply

In August last year, when President Kenyatta lifted several restrictions, Kenyans withdrew more than Sh58.5 billion from their bank accounts.

The easing up led to a drop in the total money supply in the economy -from Sh3.9 trillion in July to Sh3.84 trillion in August, according to data from the Kenya National Bureau of Statistics (KNBS). “This decline was mainly attributed to drop in demand deposits and withdrawal of money from banks by businesses that are opening up,” said KNBS.

It was a positive sign that the economy, which had been choking under the stringent containment measures aimed at curtailing the spread of Covid-19, was on a recovery path.

Last year, Mr Kenyatta eased the containment measures. As a result, investors who at the height of the pandemic preferred to park their money in government securities had instead been funneling the cash into the economy by re-stocking or upgrading their facilities after months of inactivity.

And as the economy recovered, the State discontinued emergency measures that had been put in place to cushion those hit the hardest by the virus.