Kenyans abroad sent home $1.42b to support shilling
By Otiato Guguyu | February 4th 2017
Kenyans abroad sent home Sh147 billion ($1.42 billion) for the 10-month period ending October 2016. Data from the Central Bank shows that on average, Kenyans sent home Sh14.7 billion ($141.9 million) each month this year up from Sh13.5 billion ($131 million) to October last year.
At Sh14.7 billion a month, higher diaspora remittances are the single largest contributor to foreign exchange ahead of major exports such as tea and tourism. Money from abroad is crucial in cushioning the shilling from dollar pressure currently being driven by demand for payment of month-end import bills.
The CBK Governor Patrick Njoroge said part of the external threat to Kenya from the American presidency is the threat of drying up of support from Kenyans abroad if President Trump makes good his threat to deport them. “If you get all those Kenyans arriving here with their belongings wrapped up in a blanket then that will be $160 million gone,” he said.
Money from the diaspora and government borrowing may be the saviour of Central Bank foreign currency reserves as it battles to control shilling volatility. Dr Njoroge said the Central Bank had ample reserves not to defend the shilling but to manage volatility so that there are no major spikes.
“We had a target of $5,633 million by December 2016 and yet we closed the year at $6,788 million, that shows you where we are,” Njoroge said. Last week,
CBK reported $6,944 million which is equivalent of 4.55 months of import cover. Reuters reported that the Shilling exchanged at 103.8 against the dollar yesterday quoting traders who said the stability drew support expectations of offshore foreign exchange inflows into local Treasury bonds.
The Central bank of Kenya blamed rogue traders for the fall of the shilling in the New Year stating that all factors favoured a stable shilling.
Njoroge said import orders that require dollars for trading were very low as well as dividend payments at the time and the high demand was driven by speculation rather than fundamentals. “The trading at the forex market was very thin, we have looked at the data, we were doing $10 million to $20 million yet in a normal trading day we do $70 million to $100 million,” he said.
The Governor said the low trading activity was due to the holiday effect that is normal after December. “The fundamentals were clear that there was stability, what we had was an occasional indiscipline of a dealer,” Njoroge said.
He disputed claims that there were big orders to pay dividends saying the CBK is able to see when big corporates come to the market to get dollar orders to pay dividends.
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