The continued negative economic shocks occasioned by the shortage of US dollars is taking a toll on the shilling leading to liquidity challenges.
If the trend continues the reduction risks sinking Kenyans into higher transactional costs.
The liquidity challenges witnessed last week led to an under subscription in government securities with T-bills recording an uptake of 49.2 percent.
This was a significant decline from the 121.6 percent recorded the previous week.
The 182-day and 364-day papers also recorded undersubscriptions of 36.9 percent and 9.3 percent from an oversubscription rate of 174.7 percent and an undersubscription rate of 44.3 percent respectively, recorded the previous week.
This has been attributed to persisting tightened liquidity in the money market with the average interbank rate increasing to 7.2 percent from 6.9 percent recorded the previous week.
The last time interbank rate was this high was in October 2019.
According to Central Bank of Kenya (CBK), Commercial banks’ excess reserves stood at Sh14.6 billion in relation to the 4.25 percent cash reserves requirement (CRR).
“Liquidity in the money market decreased during the week ending March 23 as tax remittances more than offset government payments,” Said CBK in a statement.
The economy has in the past month faced a biting dollar shortage as the shilling dropped to a record Sh131 against the greenback.
On Friday, the Google Currency tracker mapped the shilling at 131 units against the dollar, having shed almost 14 per cent in the past 12 months.
In an effort to cushion Kenyans from the impacts of the dollar shortage President William Ruto on Wednesday said the government is seeking an agreement that will see Kenyans access fuel on a deferred six-month credit.
He said the move will ease demand for about 500 million dollars every month from this market.
The developments come ahead of the Monetary Policy Committee (MPC) set to meet on Wednesday, 29th March 2023, to review the outcome of its previous policy decisions and recent economic developments.
The MPC will also decide on the direction of the Central Bank Rate (CBR).
