The shilling has depreciated 5.7% from March 12, the day Kenya recorded its first coronavirus case, when it traded at 102.3 units to the greenback.

The local currency has come under pressure in recent months as demand for dollars surged and supply squeezed by lack of tourists and a reduction in commodity exports.

It has also been dragged down by demand for hard currencies from importers resuming business after the State started to ease coronavirus containment measures in July.

“This was likely a result of increased dollar demand with less supply. The demand was been driven by two forces; the first one being the Central Bank of Kenya (CBK) communication of the intention to buy $300 million from commercial banks for three months (March, April, and May),” the Parliamentary Budget Office (PBO) said of the shilling’s rapid weakening in recent months.

“The second one was, the possible buying and hoarding of dollars as a result of panic in the market caused by uncertainty due to the Covid-19 pandemic.”

Meanwhile, CBK data shows that foreign currency bank deposits held by Kenyans hit a historic high of Sh671.4 billion, up from Sh625.9 billion in February, one of the largest three-month jumps.

This is an indication that the wealthy are protecting the value of their cash holdings rather than seeking new areas to invest their fortunes.

Part of the jump was also attributed to the weakening of the shilling, which inflated dollar accounts when converted to local currency.