A widening current account deficit and rising debt level could herald a weaker shilling, helped by the strengthening US dollar against other world currencies.
The shilling is likely to weaken further against the dollar by the end of this year, touching as low as 104.3, a Citi economist warned.
Citi Africa economist David Cowan says a widening current account deficit and rising debt level could herald a weaker shilling, helped by the strengthening US dollar against other world currencies.
“Kenya will have to get on top of its fiscal deficit post the August 2017 elections,” says Mr Cowan.
The projection contrasts with that by the Central Bank of Kenya, (CBK).
Reduced imports of food and supplies for the nearly completed standard gauge railway project will help narrow the country’s current account deficit to about 5.8 per cent of the gross domestic product (GDP) by December supported by rising dollar inflows from remittances, tourism receipts, the Central Bank of Kenya (CBK) said following the Monetary Policy Committee meeting which kept the base lending rate steady at 10 per cent. The shilling on Friday exchanged at 103.28 to the dollar per the official mean indicative rates.
The Kenya shilling did not lose against the dollar even as fears of the negative impact of the August 8 election on the economy intensified.
On the eve of the election, the shilling weakened slightly against the greenback, trading at Sh103.90 buying and Sh104.05 selling. This was attributed to last-minute demand from retailers and oil importers buying dollars ahead of elections.
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