Kenyan Shilling Falls The Lowest Against The US Dollar In The History Of Kenya

Kenya Shilling depreciated against the US Dollar by 0.3 percent to close the week at 160.3 shillings, from 159.9 shillings recorded the previous week.

On a year-to-date basis, the shilling has depreciated by 2.1 percent against the dollar, adding to the 26.8 percent depreciation recorded in 2023.

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Pressure on the Kenyan shilling will continue coming from:

• An ever-present current account deficit which came at 3.5 percent of GDP in Q3’2023 from 6.4 percent recorded in a similar period in 2022,

• The need for government debt servicing continues to put pressure on forex reserves given that 67.1 percent of Kenya’s external debt was US Dollar denominated as of June 2023, and,

• Dwindling forex reserves are currently at USD 6.8 mn (equivalent to 3.6 months of import cover), which is below the statutory requirement of maintaining at least 4.0 months of import cover.

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The shilling is however expected to be supported by:

• Diaspora remittances stand at a cumulative USD 3,817.4 million as of November 2023, 4.0 percent higher than the USD 3,670.6 million recorded over the same period in 2022, which has continued to cushion the shilling against further depreciation. In the November 2023 diaspora remittances figures, North America remained the largest source of remittances to Kenya accounting for 57.2% in the period.

• The tourism inflow receipts came in at USD 333.9 mn in 2023, a 24.6% increase from USD 268.1 mn inflow receipts recorded in 2022, and tourist arrivals improved by 34.1% in the 12 months to October 2023, compared to a similar period in 2022.

Key to note, Kenya’s forex reserves decreased marginally by 0.2 percent during the week to USD 6.81, from USD 6.83 bn recorded the previous week, equivalent to 3.6 months of import cover lower than 3.7 months of import cover recorded the previous week, and remained below the statutory requirement of maintaining at least 4.0 months of import cover.

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