The Central Bank of Kenya building in Nairobi. The CBK seeks to improve the quality of balance of payment data. Photo/FILE
What you need to know:
The Monetary Policy Committee, an independent body that guides CBK’s policy decisions, noted after its November meeting that ongoing revision of the data could narrow Kenya’s current account—the difference between expenditures on imports and inflows from exports.
The new computation could change perception of the Kenya shilling as being vulnerable to foreign currency shortage.
The shilling is set to get a boost from a re-computation of foreign currency inflows into Kenya, which shows that Central Bank has been under-estimating forex sent home by the diaspora and international investors.
The Monetary Policy Committee, an independent body that guides CBK’s policy decisions, noted after its November meeting that ongoing revision of the data could narrow Kenya’s current account—the difference between expenditures on imports and inflows from exports.
MPC chairman Njuguna Ndung’u also said the CBK has been working with the Kenya National Bureau of Statistics (KNBS) and the International Monetary Fund (IMF) to improve the quality and speed of delivery of the balance of payment data, which in addition to the current account captures wider data such as inflows from the diaspora and foreign direct investments.
“A reconstituted series of the current account deficit shows that the 12-month cumulative deficit (as a percentage of GDP) improved from 10.45 per cent in December 2012 to an estimated level of 7.5 per cent by September 2013. This is within the internationally accepted range of sustainable current account deficits,” said Prof Ndung’u.
The new computation could change perception of the Kenya shilling as being vulnerable to foreign currency shortage.
Due to a narrow export base, Kenya’s stock of foreign exchange reserves occasionally falls below the statutory minimum of four-month import cover, putting the value of the local unit at risk and threatening to import inflationary pressures.
Even with the revision of figures, analysts however still see Kenya’s export underperforming regional peers and expect substantial improvement of current account to be gradual, and only stop being a problem when oil is finally produced.
“We expect improvements to be gradual and contingent on oil developments. Kenya has substantially underperformed regional peers in terms of export growth, but oil production – not expected for several years – could change this,” said Razia Khan, head of research on Africa at Standard Chartered Plc.
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