During the week, the Kenya Shilling gained against the US Dollar by 0.5%, to close at Kshs 142.8, from Kshs 143.5 recorded the previous week.
On a year-to-date basis, the shilling has appreciated by 9.0% against the dollar, a contrast to the 26.8% depreciation recorded in 2023.
The shilling will receive support from the 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, North America remained the largest source of remittances to Kenya accounting for 55.2% in the period.
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At the same time, 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 will also pile pressure on the Kenyan shilling.
What is more, the dwindling forex reserves, currently at USD 6.9 bn (equivalent to 3.7 months of import cover), which is below the statutory requirement of maintaining at least 4.0 months of import cover will affect the shilling as well.
Key to note, Kenya’s forex reserves decreased by 0.6% during the week to USD 6.9 bn from the USD 7.0 bn recorded the previous week, equivalent to 3.7 months of import cover, to remain relatively unchanged from the previous week, and remained below the statutory requirement of maintaining at least 4.0 months of import cover.
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