NAIROBI, Jan 31 (Reuters) - Kenya's foreign exchange
market will be stable this year, mainly due to an improvement in
the current account deficit, the governor of the central bank
said on Tuesday.
The deficit narrowed to 4.9% of gross domestic product at
the end of last year, Patrick Njoroge told a news conference,
better than the bank's projection of 5.9%.
He said that the current account deficit is expected at 5.4%
this year, well around the "sweet spot of about 5%".
The improvement in the deficit was driven by higher export
earnings from tea and manufactured goods, Njoroge said, as well
as an increase in the amount of cash remittances sent home by
Kenyans living abroad.
The Kenyan shilling weakened 9% against the dollar
last year, he said. The currency has so far this year lost 0.8%
against the dollar, Njoroge said.
The central bank's foreign exchange reserves remained
adequate despite slipping below the statutory requirement of
four months worth of import cover last week, the governor said,
citing expected hard currency inflows.
"We don't have any concerns there. We expect that the cover
will increase and the reserves we are holding are adequate," he
said.
Hard currency reserves slid to $7 billion last week, worth
3.92 months of import cover, the central bank said, from $7.38
billion the previous week, or 4.13 months worth of imports.
The central bank did not say why the reserves fell, but
market participants attributed the drop to the repayment of
foreign loans.
"Given the shocks we have had... we accept lower reserve
cover," Njoroge said, citing a jump in yields of
dollar-denominated bonds last year, which prevented Kenya from
issuing a new euro bond.
Kenya is expecting to receive fresh financing from the World
Bank and a $300 million tranche from an existing lending
programme with the International Monetary Fund by the end of
June this year, which will bolster reserves, Njoroge said.
(Reporting by Duncan Miriri; Editing by Sharon Singleton)
Reuters Messaging:
duncan.miriri.thomsonreuters.com@reuters.net))
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.