Low Fuel Prices Set To Ease The 8.66 Percent CPI Weighted Transport Index

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Energy Regulatory Commission revised downwards its fuel pump prices for the April 15th – May 14th period on account off lower import prices for refined petroleum products and stability in the USDKES exchange rate.

Average landed cost of imported Super Petrol, Diesel and Kerosene decreased 4.22%, 2.92%, and 8.27%, respectively. This has guided the price reduction of Super Petrol, Diesel and Kerosene by KES 3.06, KES 1.82 and KES 3.58 per liter respectively.

According to economic analysts, this may ease the 8.66% CPI weighted transport index which increased 4.58% y/y on average in the last two months; reflecting the fuel pump increases in the last two monthly reviews.

IMF

International Monetary Fund conducted Article IV consultations and held discussions on the second reviews under a USD 1.5Bn precautionary Stand-By Arrangement (USD 989.8Mn) and a Stand-By Credit Facility (USD 494.9Mn) during April 3 – April 13 team visit to Kenya.

The IMF team urged Kenyan authorities to reduce the budget deficit envisaged for 2017/18 and beyond as a measure to tame debt levels. Fiscal year 2017/18 budget deficit is lower at 6.3% of projected GDP in comparison to 2016/17 deficit of 8.90% of estimated GDP.

The IMF team also reiterated the negative impact of interest rate capping which has slowed down private sector credit. Currently, at 4.00% level, the private sector credit growth is below the ten-year average of 19% and will weigh down on the economy.

In other news, last week ended on a mellow note as trading activity contracted significantly due to investors shifting focus to the primary auction. Bond turnover tapered to KES 335.6Mn from the previous day’s KES 819Mn. Secondary market trading is expected to remain light this week as investors await the results of the primary auction tomorrow evening.

However, investors continue to show keen interest on infrastructure bonds and bonds in the intermediate space. The monetary regulator intervened in the market on Thursday by offering KES 30Bn on repos – bids received came in at KES 32.3Bn bids where the regulator accepted KES 30Bn of these at 5.003% for the 7 -day TAD.

 

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