Shilling Remains Unchanged: Closes at Ksh 103.8 Against the Dollar

The Kenyan Shilling remained stable against the US Dollar to close at 103.8 shillings, unchanged from the previous week.

This was supported by inflows from diaspora remittances and inflows from offshore investors buying government debt, which aided in mitigating the pressure from liquidity in the local money market.

On a Year To Date (YTD) basis, the shilling has depreciated by 2.0 percent against the dollar, in comparison to the 1.3 percent appreciation in 2018.

According to Cytonn Investments, the shilling should remain relatively stable against the dollar in the short term, supported by:

1. The narrowing of the current account deficit, with preliminary data indicating that the current account deficit narrowed to 4.2 percent of GDP in the 12-months to July 2019, from 5.0 percent recorded in December 2018. The decline has been attributed to the resilient performance of exports particularly horticulture and coffee, strong diaspora remittances, and higher receipts from tourism and transport services. Growth of imports also slowed mainly due to lower imports of food,
2. Improving diaspora remittances, which have increased cumulatively by 8.9 percent in the 12-months to August 2019 to USD 2.8 bn, from USD 2.6 bn recorded in a similar period of review in 2018. The rise is due to:
   • Increased uptake of financial products by the diaspora due to financial services firms, particularly banks, targeting the diaspora, and,
   • New partnerships between international money remittance providers and local commercial banks making the process more convenient,
3. CBK’s supportive activities in the money market, such as repurchase agreements and selling of dollars, and,
4. High levels of forex reserves, currently at USD 9.1 bn (equivalent to 5.7-months of import cover), above the statutory requirement of maintaining at least 4.0-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover.

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