The Kenyan shillings is still under pressure as it strives to sail through the Covid-19 pandemic that is sweeping both in Kenya and across the world.
The local currency has been crawling for the last 5 months as Covid-19 restrictions by the Kenyan government hit it hard although the CBK has maintained that “it has shown resilient amid the pandemic.”
During the month of August, the local currency shed off 0.5 percent to end the turbulent month at 108.2 shillings from 107.7 shillings recorded at the end of the month of July.
The 0.5 percent depreciation of the shilling during the month has been attributed to the increased dollar demand amidst lackluster dollar inflows.
During the first week of September, the Kenyan shilling remained unchanged against the US dollar, ending the week at 108.2 shillings.
On a year-to-date basis, the local currency has depreciated 6.3 percent as of July 2020 compared to an appreciation of 0.5 percent registered in July 2019.
Kenyan shilling will enjoy some comfort during the month of September shielded by the current high forex reserves. The reserves are currently at 8.9 million US dollars.
“The current forex reserves are equivalent to 5.4 months of import cover, above the statutory requirement of maintaining it at at least 4 months of import cover and above the ECA’s convergence criteria of 4.5 months of import cover,” says CBK on their website.
The Kenyan shilling is also likely to be shielded by the relatively high diaspora remittances that increased by 23.4 percent to 277 million US dollars during the month of July 2020 from 225 million US dollars registered in July 2019.
Kenya’s current account deficit has also narrowed to 4.7 percent of the country’s GDP in the 12 months to July 2020 compared to 5 percent to GDP in 12 months to July 2019.
Is the Kenyan shilling going to prove the naysayers wrong and bloom during the month of September? Has the CBK put in place enough firepower to help boost the local currency?