The Kenya Shilling appreciated marginally last week against the US Dollar by 0.3 bps, to close the week at Kshs 129.3, relatively unchanged from the previous week.
On a year-to-date basis, the shilling has appreciated by 17.6% against the dollar, a contrast to the 26.8% depreciation recorded in 2023.
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The shilling will be supported by:
Diaspora remittances stood at a cumulative USD 4,872.0 mn in the 12 months to November 2024, 16.7% higher than the USD 4,175.0 mn recorded over the same period in 2023. In the November 2024 diaspora remittances figures, North America remained the largest source of remittances to Kenya accounting for 53.4% in the period, and,
The tourism inflow receipts came in at USD 352.5 bn in 2023, a 31.5% increase from USD 268.1 bn inflow receipts recorded in 2022, and owing to tourist arrivals that improved by 14.9% in the 12 months to October 2024, compared to a similar period in 2023.
Improved forex reserves are currently at USD 9.2 bn (equivalent to 4.7 months of import cover), which is above the statutory requirement of maintaining at least 4.0 months of import cover and the EAC region’s convergence criteria of 4.5 months of import cover.
The shilling is however expected to remain under pressure in 2025 as a result of:
An ever-present current account deficit which came at 3.8% of GDP in Q2’2024 from 3.7% recorded in Q2’2023, and,
The need for government debt servicing continues to put pressure on forex reserves given that 67.2% of Kenya’s external debt is US Dollar-denominated as of June 2024.
Key to note, Kenya’s forex reserves increased by 2.1% during the week, to USD 9.2 bn from the USD 9.0 bn recorded in the previous week, equivalent to 4.7 months of import cover, from 4.6 months recorded last week, and above the statutory requirement of maintaining at least 4.0-months of import cover.
The recent increase in forex reserves is primarily attributed to the disbursement from the International Monetary Fund (IMF).
On October 30, 2024, the IMF approved a combined disbursement of around USD 606.1 mn following the successful completion of Kenya’s seventh and eighth reviews under the Extended Fund Facility (EFF), Extended Credit Facility (ECF), and Resilience and Sustainability Facility (RSF) arrangements.
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