Last week, the Kenya Shilling gained 0.1 percent against the US dollar to close at 100.7 shillings from 100.8 shillings the previous week supported by inflows from offshore investors amid high liquidity in the money market.
Economic analysts have attributed the strengthening of the shilling on the narrowing of the current account deficit, to 8.9 percent of GDP in Q1’2018 compared to 11.3 percent in Q1’2017 on account of the faster growth of exports at 7.1 percent compared to import growth of 6.5 percent.
The shilling might also be enjoying the glory of stronger inflows from principal exports, which include coffee, tea and horticulture, which increased by 9.3 percent during the month of April to 21.9 billion shillings from 20.0 billion shillings in a similar period the previous year, with the exports from coffee, and horticulture increasing by 6.7 percent and 25.0 percent on a year-to-year basis respectively while tea exports have declined marginally by 1.6 percent on a year-to-year.
There have been improving diaspora remittances, which increased by 16.9 percent to USD 253.7 million in May 2018 from USD 217.1 million in April 2018, with the largest contributor being North America at USD 122.8 million attributed to:
The high forex reserves have also helped in shielding the shillings in the recent times. The reserves currently stand at USD 8.9 billion (equivalent to 5.9 months of import cover) and the USD 1.5 billion stand-by credit and precautionary facility by the IMF, still available until September 2018.
The International Monetary Fund
The International Monetary Fund (IMF) recently completed the review of the USD 1.5 billion stand-by credit and precautionary facility. It, however, did not disclose the results of the review and their recommendations, stating that it had submitted the report to the government, which needed more time to consider its publication.
The Executive Board of the International Monetary Fund (IMF) had approved Kenyan government’s request for a 6-month extension of the Stand-By Arrangement (SBA) on 12th March 2018, to allow more time for the completion of the outstanding reviews.