Kenyan Shilling Falls Further, Hits Ksh 121.1, Lowest In History – Soko Directory Team
On a year-to-date basis, the shilling has depreciated by 7.1 percent against the dollar, higher than the 3.6 percent depreciation recorded in 2021.
Sufficient diaspora remittances stand at a cumulative USD 4.0 bn as of September 2022 YTD, representing a 14.3% y/y increase from USD 3.5 bn recorded over the same period in 2021.
During the week, the Kenyan shilling depreciated by 0.1 percent against the US dollar to close the week at 121.1 shillings, from 121.0 shillings recorded the previous week.
The depreciation of the Kenyan shilling was partly attributable to increased dollar demand from the oil and energy sectors against a slower supply of hard currency.
On a year-to-date basis, the shilling has depreciated by 7.1 percent against the dollar, higher than the 3.6 percent depreciation recorded in 2021.
“We expect the shilling to remain under pressure in 2022,” said experts from Cytonn Investments.
Pressure on the Kenyan shilling will come from:
High global crude oil prices are on the back of persistent supply chain bottlenecks coupled with high demand as most economies gradually recover.
An ever-present current account deficit estimated at 5.2 percent of GDP in the 12 months to August 2022, the same as what was recorded in a similar period in 2021.
The aggressively growing government debt continues to put pressure on forex reserves given that 68.1 percent of Kenya’s debt was US Dollar denominated as of July 2022.
The shilling is however expected to be supported by:
Sufficient diaspora remittances stand at a cumulative USD 4.0 bn as of September 2022 YTD, representing a 14.3% y/y increase from USD 3.5 bn recorded over the same period in 2021.
Sufficient Forex reserves currently at USD 7.3 bn (equivalent to 4.1 months of import cover), which is above the statutory requirement of maintaining at least 4.0-months of import cover.
It is important to note that Forex reserves have dropped by 16.5% YTD from USD 8.8 bn. The chart below summarizes the evolution of Kenya’s months of import cover over the last 10 years.
Related Content: Kenyan Shilling Losing To The Dollar But Still Strong In The Region
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