The US dollar.[photo/pinterest]
The Kenyan shilling is expected to uphold its relative stability this year with the help of the dollar flows from the Kenyans living abroad and this is an observation from the analysts citing stronger growth outlook in the US.
The US economy is seen gaining further momentum on favorable policies including prospects of tax cuts in 2018 and this has led to a projected growth of between 2.3 and 2.5 per cent compared to an estimated 2.2 which was attained in 2017 as stated by the global economists.
The stronger growth in the US is anticipated to help withhold the momentum in diaspora remittances which is a key factor which sustained the shilling stability largely against the greenback in 2017.
“We are expecting the dollar to go stronger in 2018 which will boost much more inflows from the US,” Churchill Ogutu, a senior research analyst at Genghis Capital said. “But with not much investment opportunities in the US, it will sustain the dollar remittances from the US since returns here (in Kenya) are relatively higher.”
The increased dollar inflows help ease pressure on the shilling by supporting the supply side of the greenback against the demand by importers and companies paying expatriates and dividends to foreigners.
Kenyans in North America, largely the US, account for the largest share of the total inflows, standing at about 57.4 per cent in September, for example.
The remittances, Kenya’s largest source of foreign exchange, hit a record Sh161.57 billion ($1.567 billion) in 10 months through October 2017.
“When you factor in remittances, North America leapfrogs to the top of our (Kenya) foreign policy,” Aly-Khan Satchu, the CEO of investment advisory firm Rich Management Group said via email.
“I was concerned that a MAGA (Make America Great Again) Trump was going to weigh on this curve, but so far we appear to have escaped that dragnet and therefore I expect close to double-digit gains year on year.”