During the week, the Kenya Shilling depreciated by 0.4 percent against the US dollar to close the week at 143.6 shillings from 142.9 shillings recorded the previous week.
On a year-to-date basis, the shilling has depreciated by 16.3 percent against the dollar, adding to the 9.0 percent depreciation recorded in 2022.
Analysts from Cytonn Investments say that they expect the shilling to remain under pressure in 2023 with no hope of breathing shortly.
Pressure on the shilling will come from:
An 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, and,
The need for government debt servicing continues to put pressure on forex reserves given that 66.8% of Kenya’s external debt is US Dollar denominated as of April 2023.
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The shilling is however expected to be supported by:
Diaspora remittances stand at a cumulative USD 2,033.8 mn in 2023 as of June 2023, albeit 0.5 percent lower than the USD 2,044.6 mn recorded over the same period in 2022.
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The tourism inflow receipts which came in at Kshs 268.1 bn in 2022, a significant 82.9 percent increase from Kshs 146.5 bn inflow receipts recorded in 2021.
Adequate forex reserves currently at USD 7.4 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.