Financial markets remained calm on Monday ahead of the Nasa coalition’s planned protests to force out of office select Independent Electoral and Boundaries Commission (IEBC) staff they accuse of bungling the August 8 presidential election.
The protests, set to take place Tuesday morning, are expected to disrupt business in major cities, especially in Nairobi where the IEBC’s Anniversary Towers headquarters on University Way will be the centre of the action.
On Monday, the shilling was stable against the dollar, exchanging at 103.25 units even as end month demand from importers loomed.
The stock market was marginally down at close of trading, shedding Sh2.8 billion in market capitalisation to stand at Sh2.428 trillion, while the benchmark NSE 20 share index was down 0.4 per cent or 14 points to close the day at 3,750 points.
Both the opposition National Super Alliance (Nasa) and the ruling Jubilee Party have taken a hard stance ahead of the repeat presidential poll, raising political temperatures in the country.
Nasa insists there will be no elections without changes at the IEBC, while Jubilee says the poll, organised by the IEBC, must take place on October 26 as planned.
The return of mass action to the streets of Nairobi raises the prospect of renewed disruption of business in an economy already subdued by political uncertainty.
Last year’s protests against the IEBC often set the demonstrators against the police, resulting into sporadic violence that forced businesses to close in fear of looting.
President Uhuru Kenyatta on Monday responded to Nasa’s planned protests with a stern warning that they will be met by full force should they disrupt the lives of other Kenyans.
“People are free to demonstrate, but they must ensure that they do not destroy other people’s property. Mama mboga’s vegetables will not be destroyed. Businesses will not be attacked. Let them not think that they will break into other people’s shops and interfere with the daily routine of other Kenyans. That, we shall not allow,” he said, adding that they (opposition) “must decide whether they want to be the adjudicators or the candidates because they cannot be both.”
Senate Majority Leader Kipchumba Murkomen accused the opposition of planning economic sabotage with the calls for protests.
Experts have warned that the prolonged political standoff is a threat to Kenya’s economic growth, which is down this year compared to 2016 mainly due to prolonged drought at the beginning of the year.
In a note on Kenya earlier this month, Citi said that the political uncertainty is likely to cause economic growth for the year to fall below five percent, having previously projected it at 5.2 per cent.
Global ratings agency Moody’s has also warned that the prolonged political standoff is a negative for Kenya’s standing with international creditors, and could affect efforts to bring in policy changes meant to address the country’s widening fiscal deficit.
The resilience of the shilling is a relief however, given the negative knock-on effect of a rapidly weakening currency on cost of living in a net importing country like Kenya.
The CBK does hold a sizeable war chest of $7.52 billion worth of foreign reserves with which to iron out any volatility in the currency exchange rate.
“For the remainder of the year, we expect currency stability with the current account deficit to GDP ratio unlikely to deviate much from the seven per cent reported in April 2017-in part due to subdued import activity and resilient export demand for agricultural products,” said NIC Securities analyst Bill Oloo.
“Additionally, we believe that the CBK will be on hand to intervene should the currency show a strong weakening bias.”