Shilling Refuses To Quit and Holds Ground Against the Dollar

Last week the Kenya Shilling just refused to quit and remained stable against the US Dollar, further proving those who had predicted its doom wrong.

The local currency closing at 100.4 shillings to the US Dollar as dollar inflows from the diaspora and portfolio investors matched demand from oil importers.

On a year-to-date basis, the shilling has gained 2.7 percent against the USD with analysts from Cytonn Investments saying that the shilling should remain relatively stable against the dollar in the short term, supported by:

• Stronger horticulture export inflows were driven by increasing production and improving global prices
• Improving diaspora remittances, which increased by 50.6 percent to USD 222.2 million in March 2018 from USD 147.5 million in March 2017, attributed to (a) recovery of the global economy, (b) increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora, and (c) new partnerships between international money remittance providers and local commercial banks making the process more convenient.
• Key to note is that in 2017, diaspora remittances became the largest foreign exchange earner at 202.9 billion shillings exceeding tea exports and tourism receipts, which earned 119.9 billion shillings and 147.2 billion shillings respectively.
• High forex reserves, currently at USD 9.1 billion (equivalent to 6.2 months of import cover) and the USD 1.5 billion stand-by credit and precautionary facility by the IMF, still available until September 2018, after which a new facility will be discussed.