Foreign currency deposits in local banks hit an all-time high in February with the value of the currency being registered at Sh804.31 billion from Sh793.26 billion recorded in January.
The rise was attributed to the depreciating shilling which boosted the value of the greenback.
The shilling has depreciated to record lows against the dollar and other major currencies on the back of a fast-rising import bill that has outstripped earnings from exports, diaspora remittances and the tourism sector.
The shilling is currently exchanging at an average of 115.44 units to the dollar having depreciated by 2.03 per cent from 113.14 at the start of the year.
The rise in foreign currency deposits greatly impacted local businesses that are now struggling to make timely payments for shipments.
“Many of our members have had challenges accessing US dollars from their banks to meet their international commitments in a timely manner… Liquidity in the market is critical to allow businesses to focus on their core activities of cost-efficient production and avoid panic buying,” the Kenya Association of Manufacturers.
The business lobby also raised fears of hoarding that have prompted the dollar liquidity constraints.
The shilling has been under pressure due to high demand from importers due to the Russia and Ukraine conflict that has prompted investors and companies to seek safety in the dollar.
As a result, most firms and individuals with dollar-based accounts are hedging against further weakening by stocking up dollars or holding on tightly to greenback reserves.