Shilling Sails Through 2019, Outsmarting The Dollar By 0.5%

At last, the Kenyan shilling sailed through the year 2019, leaving those who had predicted its doom with an egg on their faces according to the annual stats compiled by Cytonn Investments.

The Kenya Shilling gained by 0.5 percent against the US Dollar to close at 101.3 in 2019, compared to 101.8 at the end of 2018.

The shilling was supported by inflows of hard currency from remittances by Kenyan workers abroad and offshore investors.

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The shilling enjoyed the narrowing of the current account deficit, with preliminary data indicating that Kenya’s current account deficit improved by 7.6 percent during Q3’2019.

The deficit for 2019 came in at a deficit of 101.0 billion shillings from 109.3 billion shillings in Q3’2018, equivalent to 8.2 percent of GDP, from 9.3 percent recorded in Q3’2018.

The improving of Kenya’s current account deficit was mainly driven by the narrowing of the country’s merchandise trade deficit balance by 6.7 percent and a rise in secondary income transfers by 4.3 percent.

During the year, 2019, there was an improving diaspora remittance, which stood at 218.8 million in November 2019 and cumulatively increased by 5.0 percent in the 12-months to November 2019 to USD 2.8 billion, from USD 2.7 billion recorded in a similar period of review in 2018.

Foreign capital inflows increased in 2019 with investors looking to participate in the equities market to take advantage of the cheap valuations in the market.

The Central Bank of Kenya (CBK) remained supportive during the year with is activities in the money market, such as repurchase agreements and selling of dollars.

There were high levels of forex reserves, currently at USD 8.8 billion (equivalent to 5.4-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.

As 2020 starts to take shape, analysts are now optimistic that the local currency will continue holding the ground against the US dollar as well as other major global currencies.

READ: Kenya’s GDP Slows To 5.1 Percent In Quarter 3 Of 2019