Kenya’s current account deficit, a measure of a nation’s trade and financial flows with other nations, widened to 5.5% of the GDP in the 12 months to May 2021 compared to 5.2% of GDP in the same period last year, according to data released by the Central Bank of Kenya (CBK). The current account deficit touched a peak of 7.2% of GDP in 2017 as the country dealt with election-related uncertainty.
CBK blames lower service receipts for the widening current account deficit as service income fell in 2020 and offset the increased inflows from exports and overseas remittances.
Remittances from Kenyans working abroad maintained an upward trend and reached an all-time high of $315.8 million in May this year, up by 22% from $258.2 million in May 2020.
Foreign currency reserves held by the Central Bank of Kenya rose for the third consecutive week to $9.59 billion as of 8th July from $9.49 billion the previous week, supported by inflows from the IMF, World Bank, and Eurobond IV. The reserves are adequate to provide 5.86 months of import cover, above CBK’s statutory requirement of at least 4 months of import cover.
As per the CBK weekly bulletin, Commercial banks’ excess reserves surged to KSh13.9 billion last week from KSh11.5 billion the previous week. The average interbank rate, which is the interest charged on short-term loans made between financial institutions, stood at 4.54% on July 8 compared to 4.82% on July 1. The average value of interbank transactions increased to KSh 11.0 billion from KSh 7.5 billion in the previous week.
Also read: Remittances from US Reach All-time High of $182.6 Million in May
