Economy

CBK projects Sh734bn inflows this year on foreign investors

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Central Bank Governor Dr Kamau Thugge on October 24, 2023. PHOTO | DENNIS ONSONGO | NMG

The Central Bank of Kenya (CBK) expects Sh733.9 billion ($4.6 billion) in foreign flows into the economy this year.

The projected inflows, if realised, would be the highest since 2021 and mark a rebound from nearly two years of a slump due to foreign investor flight.

The apex bank estimates that its financial account closed at Sh558.4 billion ($3.5 billion) in 2023, including Sh72.9 billion ($457 million) in foreign direct investments.

Read: Why CBK dropped its dollar estimate reporting in new shift

The CBK has attributed the projected rise in financial inflows to the return of foreign investor flows in the economy and enhanced disbursements from Kenya’s multilateral lenders and development partners.

“We expect a total of $3.5 billion in 2023 and $4.6 billion in 2024. This would include portfolio inflows, foreign direct investments as well as disbursements from our development partners, multilateral institutions, and regional partners,” CBK governor Kamau Thugge said last week during a media briefing.

Kenya has seen a windfall from external borrowings in the opening months of 2024, including Sh109.6 billion ($684.7 million) from the International Monetary Fund (IMF) in January.

The Exchequer has received a Sh61.6 billion ($385 million) loan from the Trade and Development Bank, which was also approved last month.

Kenya still expects the disbursement of Sh15.1 billion (€88 million) from the African Development Bank and Sh240.2 billion ($1.5 billion) from the World Bank.

The attractiveness of Kenya as a foreign investor destination is expected to find more impetus from interest rate cuts in advanced economies, which are seen cushioning fresh inflows into advanced and frontier economies.

The recent rally in the Kenya shilling could be seen as attractive by foreign investors who, in the past two years, marked foreign exchange losses from the sharp depreciation of the local currency.

The improved foreign investment flows are expected to not only stabilise the local exchange rate but also improve the availability of hard currency in the market.

Read: CBK buys dollars to build foreign exchange reserves

The financial account covers claims on or liabilities to non-residents concerning financial assets and largely covers direct investment, portfolio investment, and reserve assets.

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