The Kenyan shilling has held steady and outperformed its regional peers having gained 2.3% this year, a report by the Commercial Bank of Africa (CBA) has revealed.
CBA in its October economic report for Kenya attributes the strength of the Kenyan Shilling to what it terms as hawk eyed surveillance by the Central Bank of Kenya (CBK), through proactive liquidity management and deployment of foreign exchange reserves which currently stand at Ksh8.44 billion.
The lender in the report states that the shilling is expected to remain under pressure from higher fuel prices and unfavorable interest rate differentials but notes that CBK should be able to deal with any emerging challenges.
“Strong performance of the Kenyan Shilling is against a backdrop of persistent emerging and frontier markets sell off due to rising US interest rates and a strengthening dollar. The shilling has been anchored by improved US dollar liquidity from diaspora remittances,” reads the report.
CBA also projects that Kenya’s economy will record a 5.5% growth this year attributable to economic diversification and strong agricultural production.
“The economy defied the lethargy in government spending to accelerate to 6.3% in the second quarter from 4.7% a year earlier and 6.0% growth in the first half of 2018. Increased agriculture production shored up the agro-processing segment of the manufacturing sector as well as the retail and wholesale sectors,” further reads the report.
A combination of rising inflation and potential pick up in government borrowing has also been cited as an inhibitor to the country’s growth prospects.
CBA has also joined the bandwagon of financial institutions that have criticised the country’s slow credit growth including The World Bank and the AfrAsia bank with credit to the productive sector having only grown 4.5% in 2018.