Pressure On Kenyan Shilling Mounts, Falls To The Lowest Against The US Dollar

During the week, the Kenya Shilling depreciated by 0.4 percent against the US dollar to close the week at 144.2 shillings from 143.6 shillings recorded the previous week.

On a year-to-date basis, the shilling has depreciated by 16.8 percent against the dollar, adding to the 9.0 percent depreciation recorded in 2022.

Pressure on the local currency will come from the ever-present current account deficit, which came at 2.3 percent of GDP in Q1’2023 from 4.2 percent recorded in a similar period last year.

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The need for government debt servicing continues to put pressure on forex reserves given that 66.8 percent of Kenya’s external debt that is US Dollar denominated as of April 2023 will pile more pressure on the Kenyan shilling.

The shilling is however expected to be supported by diaspora remittances stood at a cumulative USD 2,411.9 mn in 2023 as of July 2023, 2.0 percent higher than the USD 2,364.0 mn recorded over the same period in 2022.

The tourism inflow receipts which came in at Kshs 268.1 bn in 2022, a significant 82.9% increase from Kshs 146.5 bn inflow receipts recorded in 2021.

Adequate forex reserves currently at USD 7.3 bn (equivalent to 4.0 months of import cover), which is within the statutory requirement of maintaining at least 4.0 months of import cover.

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