Liquidity within Kenya’s financial system has crossed the KSh6 trillion mark, with broad money supply (M3) climbing to KSh6.03 trillion in December 2025, the highest level ever recorded.
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The figure reflects a notable expansion in liquidity circulating across the economy, with broad money rising from KSh3.99 trillion in December 2020 to KSh6.03 trillion by December 2025.
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Money supply increased steadily through 2021 and 2022, before accelerating sharply in 2023, when M3 surged from KSh4.53 trillion to KSh5.50 trillion, an increase of almost KSh1 trillion within a single year.
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Growth moderated in 2024 but picked up again in 2025, pushing overall liquidity beyond the KSh6 trillion milestone.
Broad money represents the most comprehensive measure of liquidity within an economy. The Central Bank of Kenya (CBK) tracks three key monetary aggregates: M1, M2, and M3, each representing progressively wider layers of money circulating through the financial system.
Monetary Aggregates
M1, the narrowest measure, consists of currency circulating outside banks together with demand deposits held in commercial banks. These funds are the most liquid and typically used for day-to-day transactions. By December 2025, M1 had reached KSh2.41 trillion, reflecting 13.4% year-on-year growth and roughly 30% expansion from about KSh1.85 trillion in December 2021.
M2 builds on M1 by including savings and time deposits, which remain within the banking system but are not usually used for immediate payments. By the end of 2025, M2 had grown to KSh4.68 trillion, marking 10.7% annual growth and an increase of about 30% from KSh3.61 trillion in December 2022.
M3, the broadest monetary indicator used by the central bank, includes M2 together with foreign currency deposits held in domestic banks. By December 2025, M3 stood at KSh6.03 trillion, representing 9.8% year-on-year growth and a 51% increase from approximately KSh3.99 trillion in December 2020. Foreign currency deposits accounted for KSh1.35 trillion, representing more than 22% of the total money supply.
Drivers of Liquidity Growth
The expansion in money supply has largely been driven by rising credit within the banking sector. Domestic credit reached KSh6.43 trillion in December 2025, with net lending to government standing at KSh2.29 trillion while private sector credit rose to KSh4.09 trillion.
Growing government borrowing combined with a gradual recovery in private sector lending has broadened bank balance sheets and injected additional liquidity into the economy.
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External balances have also improved in recent years, with net foreign assets rising to KSh1.18 trillion by December 2025.
When broader liquidity measures are considered, including non-bank holdings of government securities, total liquidity across the financial system reached KSh10.29 trillion by the end of 2025.
Money, in this context, behaves a bit like water in a vast irrigation system. When the channels widen through credit growth and deposits, more liquidity flows through the economy. The trick for central bankers is ensuring the flow nourishes growth rather than flooding the fields with inflation.
