Kenyan Shilling Shed Off 0.8% Against The Dollar During The Week

During the week, the Kenya Shilling depreciated against the US Dollar by 0.8%, a reversal from the appreciation observed last week to close at Kshs 144.1, from Kshs 142.9 recorded the previous week.

On a year-to-date basis, the shilling has appreciated by 8.2% against the dollar, a contrast to the 26.8% depreciation recorded in 2023.

Support for the Kenyan shilling will come from:

Diaspora remittances stood at a cumulative USD 4,253.0 mn in the 12 months to January 2024, 5.3% higher than the USD 4,039.0 mn recorded over the same period in 2023, which has continued to cushion the shilling against further depreciation. In the January 2024 diaspora remittances figures, America remained the largest source of remittances to Kenya accounting for 54.0% in the period.

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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 owing to tourist arrivals that improved by 30.7% to 192,000 in the 12 months to December 2023, from 161,000 recorded during a similar period in 2022.

The shilling is however expected to remain under pressure in 2024 as a result of:

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

The need for government debt servicing continues to put pressure on forex reserves given that 67.5% of Kenya’s external debt was US dollar-denominated as of September 2023.

Dwindling forex reserves are currently at USD 7.2 bn (equivalent to 3.9 months of import cover), which is below the statutory requirement of maintaining at least 4.0 months of import cover.

Key to note, Kenya’s forex reserves increased by 2.7% during the week to USD 7.2 bn from the USD 7.0 bn recorded the previous week, equivalent to 3.9 months of import cover, an increase from the 3.8 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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