Kenyan Shilling Sheds Off 0.5%, Ends The Week At Ksh 139.9

The Kenya Shilling depreciated by 0.5 percent against the US dollar to close the week at 139.9 shillings, from 139.2 shillings recorded the previous week, partly attributable to the persistent dollar demand from importers, especially in the oil and energy sectors.

On a year-to-date basis, the shilling has depreciated by 13.3 percent against the dollar, adding to the 9.0 percent depreciation recorded in 2022.

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Pressure on the Kenyan shilling will continue coming from the high global crude oil prices on the back of persistent supply chain bottlenecks coupled with high demand.

Pressure will also come from the ever-present current account deficit estimated at 4.9 percent of GDP in twelve months to January 2023, from 5.6 percent recorded in a similar period last year.

The need for government debt servicing continues to put pressure on forex reserves given that 67.3 percent of Kenya’s external debt was US Dollar denominated as of March 2023.

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The shilling is however expected to be supported by diaspora remittances standing at a cumulative USD 1,688.0 mn in 2023 as of May 2023, albeit 1.8 percent lower than the USD 1,718.6 mn recorded over the same period in 2022.

The tourism inflow receipts 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 is that Kenya’s forex reserves decreased marginally during the week by 1.0% to USD 7.46 billion as of June 15, 2023, from USD 7.53 billion as of June 8, 2023.

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As a result, the country’s month of import cover declined to 4.1 months of import cover, which is above the statutory requirement of maintaining at least 4.0 months of import cover, albeit lower than the 4.2 months of import cover recorded the previous week.