Tourism Cabinet Secretary Najib Balala (right) receives tourists at the
port of Mombasa. Tourism has been hit by a spate of militant Islamist
attacks in the past two years and an Ebola scare in West Africa that
even deterred visitors to other African regions. PHOTO | WACHIRA MWANGI
Kenya's shilling has held firm against the
dollar this year, supported by a shrinking trade deficit, ...
higher
transfers from workers abroad and an economy that has escaped the
beating taken by others in Africa from weak commodity prices.
The
shilling has been a sturdy performer among the main traded currencies
on the continent in 2016, and weakened less than many others in 2015 as
well.
Kenya still attracts foreign
investors who are increasingly wary of other African markets, even as
concerns about security dog the economy and worries about next year's
election dampen some enthusiasm.
Of
the big three economies, Nigeria and Egypt have foreign exchange
controls in place while South Africa has been roiled by plunging
commodity prices.
South Africa's rand
weakened 25 percent against the dollar in 2015 and has gained 0.8
percent this year. The shilling is also holding a 0.8 percent gain this
year but only slid 11 percent in 2015.
Kenya,
far smaller than its rivals but boasting a floating exchange rate and a
relatively mixed economy, has drawn foreign investors. They accounted
for 60 per cent of trade on the Nairobi bourse in the first two months
of 2016, making net purchases worth 276 million shillings ($2.72
million).
Kenya and Morocco aside,
there are few other places in Africa with liquid enough capital markets
to register on the radar of foreigners interested in shares and
government debt.
"That combination of
good companies and a beneficiary of lower oil have encouraged investors
to stay in Kenya at a time when they have left other countries, like
Nigeria," said Charles Robertson, chief economist for Renaissance
Capital.
While Nigeria grapples with
falling oil revenues, Kenya has enjoyed lower fuel costs to prime its
economy which relies on tourism, agricultural exports, regional finance
and manufacturing for regional markets.
TOURISM
Tourism
has been hit by a spate of militant Islamist attacks in the past two
years and an Ebola scare in West Africa that even deterred visitors to
other African regions. But experts say Kenya's mixed economy means it
can fall back on other earners.
Kenya's
annual import bill is projected to drop to 1.1 trillion shillings in
2016 from 1.4 trillion in 2015, which experts largely attribute to
falling steel and oil prices.
"That
creates a very suitable situation for the strengthening of our local
currency," Equity Bank Chief Executive Officer James Mwangi told
Reuters.
Kenya's current account
deficit is expected to narrow to 6.8 percent of gross domestic product
in 2016 from 8.5 percent last year, the central bank says. The
government expects to cut the budget deficit to 8.1 percent from a
projected 8.7 percent for the 2015/16 year to June, and then to 6.9
percent in 2016/17.
Kenyans abroad have sent more cash home. Remittances rose to $137.5 million in January from $114.6 million a year ago.
"Recent inflows into Kenya have been healthy," said Razia Khan of Standard Chartered.
The
central bank's foreign exchange reserves are now $7.35 billion,
equivalent to 4.7 months' worth of import cover, up from $7.07 billion
at the end of 2015, contributing to confidence in an economy forecast to
expand 6 percent in 2016.
Although a
year away, elections in August 2017 have re-ignited Kenya's fractious
politics, which could weigh on the shilling. Ethnic violence marred the
aftermath of the 2007 race, although the 2013 vote went calmly.
"It
is based on personalities, it is based on tribes. That is a hanging
risk that Kenya as a nation needs to deal with," said Mwangi.
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