Shilling Dips Marginally To 100.4 Against The Dollar But Still Resilient

Last week, the Kenya Shilling lost marginally to the US Dollar to close at 100.4 shillings from 100.3 shillings the previous week.

The marginal drop was supported by inflows from offshore investors that matched the thin dollar demand by importers, amidst tightened liquidity in the money markets.

The Kenyan Shilling has gained by 2.7 percent on a year to date basis and economic analysts still hold the view that the shilling should remain relatively stable against the dollar in the short term.

According to Cytonn Investments’ report, there has been the narrowing of the current account deficit to 5.8 percent in the 12-months to June 2018, from 6.3 percent in March 2018, attributed to improved agriculture exports, and lower capital goods imports following the completion of Phase I of the Standard Gauge Railway (SGR) project.

There is also stronger inflows from principal exports, which include coffee, tea and horticulture, which increased by 10.8 percent during the month of May to 24.3 billion shillings from 21.9 billion shillings in April, with the exports from coffee, tea and horticulture improving by 11.0, 19.1 and 2.0 percent m/m, respectively.

There has been an improving diaspora remittance, which increased by 71.9 percent y/y to USD 266.2 million from USD 154.9 million in June 2017, and 4.9 percent m/m, from USD 253.7 million in May 2018, with the largest contributor being North America at USD 130.1 million, attributed to:

1. Recovery of the global economy,
2. Increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora,
3. New partnerships between international money remittance providers and local commercial banks making the process more convenient, and,

The high forex reserves, currently at USD 8.7 billion (equivalent to 5.8-months of import cover) and the USD 1.5 billion stand-by credit and precautionary facility by the IMF, still available until September 2018.