Cash circulating outside banks reached a high of Sh. 273.4 billion in July amidst f rushed government spending at the end of the financial year in June, easing the cash flow pain for contractors, suppliers, and their employees.

Statistics from CBK indicate the cash outside banks grew from Sh257.9 billion in June to the highest level under President Ruto’s administration and surpassed the previous peak of Sh267.7 billion set in July last year.

The increase in cash outside banks coincided with the end of the government’s fiscal year on June 30 which is usually accompanied by large-ticket disbursements from the exchequer to meet targets for recurrent and development spending.

The government usually releases the money to departments, ministries and agencies who will then remit the monies to suppliers and contractors who subsequently make payments to employees, including project supervisors, managers, and casual laborers, completing the chain of money circulation in the economy.

The increased cash in circulation found a cash-strapped economy where national government pending bills had, for instance, risen to a record-high of Sh567.5 billion at the end of June from Sh537.2 billion at the end of March.

<h2>Cash Circulation</h2>

At the end of the 2022/23 fiscal year, Treasury released close to Sh460 billion in June to meet funding for recurrent and development expenditures alongside disbursements to counties under the equitable share of revenue.

“The cyclicality seen over the years speaks to the fact that there are usually outsize disbursements by the government made in July, although wrongly attributed to June.

As the government releases monies to the real sector, it results in spikes in currency in circulation from the monetary sector perspective,” noted Churchill Ogutu – an economist at IC Asset Managers.

The creation of money in the economy largely lies with commercial banks via credit generation.