The Kenya Shilling depreciated by 0.4 percent against the US dollar to close the week at 136.4 shillings, from 135.9 shillings recorded the previous week.
The depreciation of the local currency was partly attributable to the persistent 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 10.5 percent against the dollar, adding to the 9.0 percent depreciation recorded in 2022.
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The shilling will continue to receive pressure from the high global crude oil prices on the back of persistent supply chain bottlenecks coupled with high demand.
At the same time, the ever-present current account deficit was estimated at 4.9 percent of GDP in twelve months to January 2023, from 5.6 percent recorded in a similar period last year will pile pressure on the Kenyan shilling.
The need for Government debt servicing continues to put pressure on forex reserves given that 63.0 percent of Kenya’s External debt was US Dollar denominated as of December 2022 will disadvantage the shilling.
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The shilling is however expected to be supported by diaspora remittances standing at a cumulative USD 1,015.5 mn in 2023 as of March 2023, albeit 0.8 percent lower than the USD 1,023.8 mn recorded over the same period in 2022.
The shilling will also be supported by the tourism inflow receipts that came in at USD 268.1 bn in 2022, a significant 82.9 percent increase from USD 146.5 bn inflow receipts recorded in 2021.
Key to note, Kenya’s forex reserves declined by 0.6 percent during the week to remain relatively unchanged at USD 6.5 bn as of 4 May 2023.
As such, the country’s months of import cover also remained unchanged at 3.6 months, similar to what was recorded the previous week, and remained below the statutory requirement of maintaining at least 4.0 months of import cover.
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