CBK Data Shows Money Circulation Growth Has Hit as 24-Year Low

A new report from the Central Bank of Kenya (CBK) shows that December 2024 recorded the slowest growth in money circulation since 2001, rising by only 0.58%. 

Cash flow typically increases during the festive season as more Kenyans engage in festive-related spending such as travel, shopping, etc. 

However, in December 2024, the amount of money in circulation outside Kenya’s banking system grew by just Ksh1.67 billion to close the year at Ksh292.8 billion.

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What’s Driving the Slowdown?

The slow growth in cash flow comes at a time when many Kenyans are feeling the squeeze of a high cost of living and increased payroll deductions. According to experts, the introduction of the 1.5% housing levy, combined with a 2.75% contribution to the new Social Health Insurance Fund (SHIF), has significantly reduced take-home pay.

For employers, the increased payroll burden has made it harder to maintain wage growth, further limiting spending power. The Kenya Employers' Association notes that businesses are also navigating higher operational costs, meaning salary increments are being withheld - while some businesses have entirely shut down. 

A Ripple Effect on Businesses

With less disposable income, consumer spending has taken a hit, affecting businesses that rely on household expenditure. Lower purchasing power translates to reduced sales and lower revenues for firms. This, in turn, impacts the broader economy, as businesses slow down hiring and investment.

CBK data shows that in previous years, cash circulation grew much faster—3.44% in 2023, 3.38% in 2022, and 6.22% in 2021. The sharp slowdown in 2024 suggests that even the traditional December spending spree could not override the effects of the challenging economic environment.

While cash circulation hit a record Ksh292.8 billion in December 2024, the pace of growth tells a different story. It’s a signal that despite the holiday season, many Kenyans are holding back on spending, opting instead to prioritize essentials.

The development comes a few days after  Treasury Cabinet Secretary John Mbadi warned that the economic situation was likely to become more difficult in the coming months. 

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Mbadi mentioned that Kenya’s foreign debts are falling due at the “worst time”citing the recent decision to halt all foreign assistance through USAID, a move that could soon be replicated by the European Union.

Last week, Kenya and the International Monetary Fund (IMF) agreed to drop the ninth and final review of the country’s lending programme, which was set to expire next month. The programme, which started in April 2021, had about Ksh10 billion ($800 million) left, but Kenya opted out before the final disbursement.

With limited foreign aid and high debt obligations, the government plans on raising cash through domestic sources - which are already strained by the high taxes and other statutory deductions. 

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