During the week, the Kenya Shilling depreciated by 0.4 percent against the US dollar to close the week at 146.1 shillings, from 145.5 shillings recorded the previous week.
On a year-to-date basis, the shilling has depreciated by 18.4 percent against the dollar, adding to the 9.0 percent depreciation recorded in 2022.
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“We expect the shilling to remain under pressure in 2023,” said analysts from Cytonn Investments.
Pressure on the Kenyan shilling 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.
The need for government debt servicing, continues to put pressure on forex reserves given that 66.8 percent of Kenya’s external debt is US Dollar denominated as of April 2023, hence more pressure on the shilling.
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At the same time, the dwindling forex reserves are currently at USD 7.1 bn (equivalent to 3.8 months of import cover), which is below the statutory requirement of maintaining at least 4.0 months of import cover and will put more pressure on the 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, 20.26% higher than the USD 2,364.0 mn recorded over the same period in 2022.
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