Kenyan Shilling Ends The Week At Ksh 126.7 To The Dollar Catapulted By Diaspora Remittances

The Kenya Shilling appreciated against the US Dollar by 0.1 percent, to close at 128.6 shillings from 128.7 shillings recorded the previous week.

On a year-to-date basis, the shilling has appreciated by 18.1 percent against the dollar, a contrast to the 26.8 percent depreciation recorded in 2023.

The support for the Kenyan shilling will continue coming from diaspora remittances that stood at a cumulative USD 4,509.8 mn in the 12 months to May 2024, 12.8 percent higher than the USD 3,997.3 mn recorded over the same period in 2023, which has continued to cushion the shilling against further depreciation.

In the May 2024 diaspora remittances figures, North America remained the largest source of remittances to Kenya accounting for 56.0% in the period.

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The local currency will also be supported by the tourism inflow receipts that came in at USD 352.5 bn in 2023, a 31.5 percent increase from USD 268.1 bn inflow receipts recorded in 2022, and owing to tourist arrivals that improved by 27.2 percent to 2.1 mn in the 12 months to March 2024, from 1.6 mn recorded during a similar period in 2023.

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

1. An ever-present current account deficit which came at 4.0% of GDP in FY’2023 from 5.1% recorded in FY’2022,

2. The need for government debt servicing continues to put pressure on forex reserves given that 67.3% of Kenya’s external debt was US Dollar denominated as of December 2023, and,

3. Dwindling forex reserves, are currently at USD 8.3 mn (equivalent to 4.3 months of import cover), which is above the statutory requirement of maintaining at least 4.0 months of import cover.

Key to note, Kenya’s forex reserves increased significantly by 18.7 percent during the week to close at USD 8.3 bn from the USD 7.0 bn recorded the previous week, equivalent to 4.3 months of import cover, an increase from the 3.7 months recorded the previous week, and above the statutory requirement of maintaining at least 4.0-months of import cover for the first time in eleven months.

This jump could be attributed to the disbursement of the USD 1.2 bn earlier approved in April 2024, which would be used in the settlement of the remainder of the USD 600 mn the 10-year Eurobond issued in 2014 set to mature on 24^th June 2024.

Source of data here.

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