Quote:Kenya’s gross domestic savings as a percentage of GDP fell to 10.3 per cent last year from 11.2 per cent in 2016 as the rising cost of living ate into cash set aside for a rainy day.
Latest statistics by the Treasury show that total domestic savings fell to Sh795.1 billion from Sh807 billion in 2016, even with the GDP growing by 4.9 per cent at the same time to Sh7.75 trillion.
These savings are usually a barometer of the financial well-being of the population, with times of prosperity characterised by higher savings and leaner times seeing people raid their accounts for cash.
“The high cost of living is mainly why you hardly see attractive savings rate in Kenya rather than what many conventionally tend to blame, the interest rate levels.
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@Liv, low savings means the money to be lent out is small so the cost of that money must be high(rising interest rates). Domestic savings cannot support private sector and GoK appetite so borrow externally in dollars.Trump decides he needs dollars to fund US infrastructure so you have to compete with uncle sam by paying higher interest rates to borrow. In that situation GoK must keep raising interest rates to attract the few dollars. Eventually GoK goes broke like in 2015 you have capital flight which you will see through devaluation of the shilling. CBK must then hike rates to attract dollars back in the economy.