The Central Bank of Kenya (CBK) governor nominee Kamau Thugge plans to float a local dollar-denominated bond to get rich Kenyans who are holding over Sh1 trillion in deposits to release the greenback in fresh efforts to ease pressure on the Kenya Shilling.
During his vetting before the National Assembly’s Finance and Planning Committee, Thugge expressed his intention to work with the National Treasury to issue a dollar-denominated bond with attractive returns. Similar to the issuance of Treasury bonds and bills, the bond will aim to provide a favourable rate of return to entice wealthy locals and businesses to release their fixed deposit accounts held in local commercial banks.
The plan seeks to increase the availability of dollars in the domestic financial system by selling dollar-denominated bonds locally. Thugge said he would work with the National Treasury to issue the dollar bond with attractive returns to get rich locals and businesses to release their fixed deposit accounts in local commercial banks.
He stated CBK data shows that foreign currency bank deposits hit a historic high of Sh1.06 trillion in March as individuals and big companies sought a safe haven for their wealth. Investors have continued to open foreign currency-dominated accounts, hoping to gain from the sharp fall in the shillings against major currencies like the dollar and the pound. The freefall of the shilling is despite the existence of a government-backed deal to import fuel on credit from the Gulf nations, which was meant to reduce demand and arrest the depreciation.
Kamau Thugge’s plan entails targeting these wealthy Kenyans to invest in the dollar bond, thereby boosting liquidity and foreign exchange reserves. He said the CBK and the Treasury would also seek to encourage Kenyans in the diaspora to invest in the dollar bond to increase inflows into the country. Currently, the central bank’s foreign exchange reserves are at $6.49 billion (3.62 months of imports), which the bank says is sufficient to cushion any short-term shocks in the foreign exchange market.
Recognizing the potential of diaspora investments, Thugge aims to attract Kenyans to invest in the bond to increase inflows into the country. Combining local and diaspora investments can help mitigate the pressure on the Kenyan shilling and stabilize the foreign exchange market.
