Inflows to maintain shilling at 102-104 levels against dollar

The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG 

By CONSTANT MUNDA

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Summary

• Diaspora remittances hit $1.743 billion (Sh178.38 billion) in the first 11 months of 2017 and are expected to continue to rise, while a relatively lower security risk is seen boosting ongoing recovery in tourist arrivals.

Analysts at Genghis Capital forecast the shilling will remain at 102-104 levels against the US dollar, largely helped by increased inflows from Kenyans abroad, tourism receipts and exports.

“We expect diaspora remittances, tourism earnings and the rebound in exports to support the shilling between 102.00-104.00 levels in the year although the broad dollar strength will pressure the local unit,” Genghis said in an outlook report.

Diaspora remittances hit $1.743 billion (Sh178.38 billion) in the first 11 months of 2017 and are expected to continue to rise, while a relatively lower security risk is seen boosting ongoing recovery in tourist arrivals.

The Central Bank of Kenya, which was at hand to keep in check any adverse volatility on the shilling last year, still has adequate foreign exchange reserves.

READ: Kenyans in US push remittances to Sh19.2bn

Forex reserves on Thursday last week stood at $7.056 billion (Sh722.25 billion) slightly higher than $6.994 billion (Sh715.91 billion) a week earlier. That was an equivalent of 4.72 months of import cover, which is above statutory requirement of a four-month cushion.

“We see room for Kenyan shilling to modestly appreciate in the first quarter of 2018, predominantly due to increased horticulture flows and external borrowing by the government which should subsequently boost foreign exchange reserves,” Stanbic Bank economists said on January 18.