Investment

Kenyan Shilling Sinks Deeper, Hits Lowest In History

BY Soko Directory Team · November 7, 2022 10:11 am

KEY POINTS

Kenyan shilling depreciated by 0.2 percent against the US dollar to close the week at 121.5, from 121.3 shillings recorded the previous week, partly attributable to increased dollar demand from importers, especially oil and energy sectors against a slower supply of hard currency.

During the month, the Kenya Shilling depreciated by 0.5 percent against the US Dollar, to close the month at 121.5, from 120.7 shillings recorded at the end of September 2022. Is there hope on the horizon?

The depreciation of the local currency was partly attributable to the increased dollar demand from importers, especially oil and energy sectors against a slower supply of hard currency.

During the week, the Kenyan shilling depreciated by 0.2 percent against the US dollar to close the week at 121.5, from 121.3 shillings recorded the previous week, partly attributable to increased dollar demand from importers, especially oil and energy sectors against a slower supply of hard currency.

On a year-to-date basis, the shilling has depreciated by 7.4 percent against the dollar, higher than the 3.6 percent depreciation recorded in 2021.

Pressure on the Kenyan shilling will come from:

High global crude oil prices on the back of persistent supply chain bottlenecks coupled with high demand,

An ever-present current account deficit estimated at 5.3 percent of GDP in the 12 months to September 2022, the same as what was recorded in a similar period in 2021, and,

The need for Government debt servicing continues to put pressure on forex reserves given that 68.1% of Kenya’s External debt was US Dollar denominated as of July 2022.

The shilling is however expected to be supported by:

Improved diaspora remittances stand at a cumulative USD 3.0 bn as of September 2022, representing a 10.4 percent y/y increase from USD 2.7 bn recorded over the same period in 2021.

Sufficient Forex reserves currently at USD 7.2 bn (equivalent to 4.0 months of import cover), which are currently at par with the statutory requirement of maintaining at least 4.0-months of import cover, however, it’s important to note that Forex reserves have dropped by 16.5 percent YTD from USD 8.8 bn.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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