This archive report was first published on 23 September 2019.
As the deadline for the demonetisation of the old Sh1,000 note approaches, the Kenyan shilling is facing increased pressure due to a decline in diaspora remittances for the second straight month.
According to the Central Bank of Kenya (CBK), remittance inflows for August stood at $214 million (Sh22.2 billion), a 4.5 percent decline from July 2019's $224 million (Sh23.3 billion).
Despite a slight increase in cumulative inflows for the first eight months of the year, rising to $1.888 billion (Sh196 billion) from $1.809 billion (Sh187.8 billion) in 2018, the slower flow of dollars comes at a critical time for the shilling.
The market is experiencing excess liquidity, forcing the CBK to mop up large amounts in open market operations. On Monday, the CBK managed to mop up Sh40.05 billion from banks at an average rate of 8.98 percent in seven-day repurchase agreements.
The CBK also has the option of falling back on dollar reserves should the exchange rate exhibit signs of volatility.
