Dollar inflows into Kenya will result in a narrower current account gap this year and are among reasons the shilling has a “bias toward strengthening,” Central Bank of Kenya Governor Patrick Njoroge said.
The deficit, the broadest measure of trade in goods and services, is expected to shrink to 6.3 percent of gross domestic product this year, Njoroge said in an interview Thursday at the World Economic Forum in Kigali, the Rwandan capital. Kenya’s shilling has gained 1.7 percent against the dollar so far this year, helped by a 25 percent increase in earnings from tea shipments, and a 17 percent rise in tourist arrivals.
“We are getting a lot of inflows, a lot of dollar inflows, so there is a sense of a bias toward strengthening, but I’m not in the business of projecting” the direction of the exchange rate, Njoroge said. “It’s a bias in the sense the current account is closing -- that’s all.”
The foreign-exchange market of East Africa’s biggest economy is currently “very balanced” and the central bank has been intervening to help smooth volatility, Njoroge said.
“We are fully wedded to a flexible exchange-rate regime and we did not do anything to deviate from that,” he said. “I don’t care if it is appreciating or depreciating, it doesn’t matter to us, what matters to us is the market is behaving in proper fashion.”
Kenya is the world’s largest exporter of black tea and relies on agriculture shipments and income from tourists to generate most of its foreign-exchange earnings.