(Ecofin Agency) - In Kenya, the excess liquidity accumulated by commercial banks above the regulatory standard is declining. Central Bank data indicate that during the week of September 14-18, excess bank reserves declined by 25.1 billion shillings from the previous week's level.
Kenyan analysts quoted by local media explain this situation to be the result of the resumption of business activity as the Kenyan government lifts restrictions imposed to contain the spread of covid-19.
“This could be because the excess liquidity in the banks is now being used by customers. Some of this (liquidity) is also being used by banks for lending and buying government securities,” said Renaldo D'Souza, head of research at Sterling Capital, according to reports in the business media Business Daily Africa.
In March 2020, the Central Bank of Kenya lowered the reserve ratio that commercial banks must have to help them support their clients in coping with covid-19. This increased the amount of cash available to banks.
With the resumption of activity, the country's money market is moving into a new dynamic and a more diversified approach to allocating financial resources.