The Kenya Shilling depreciated by 0.4% against the US dollar to close the week at Kshs 148.1, from Kshs 147.4 recorded the previous week.
On a year-to-date basis, the shilling has depreciated by 20.0% against the dollar, adding to the 9.0% depreciation recorded in 2022.
Pressure on the Kenyan shilling will continue coming from the ever-present current account deficit, which came at 2.3% of GDP in Q1’2023 from 4.2% 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% of Kenya’s external debt is US dollar-denominated as of April 2023 will also pile pressure on the local currency.
At the same time, the dwindling forex reserves that are currently at USD 6.9 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 will put more pressure on the shilling.
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The shilling is however expected to be supported by diaspora remittances stood at a cumulative USD 2,766.3 mn in 2023 as of August 2023, 3.4% higher than the USD 2,674.5 mn recorded over the same period in 2022.
The tourism inflow receipts that came in at Kshs 268.1 bn in 2022, a significant 82.9% increase from Kshs 146.5 bn inflow receipts recorded in 2021 will also support the shilling.
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