Shilling remains stable after IMF credit facility disclosure

The shilling was stable Wednesday even as the market adjusted to news of suspension of Kenya’s access to the International Monetary Fund’s (IMF) precautionary credit facility.

The facility is meant to offer insurance against any shocks to the country’s balance of payments.

Commercial banks quoted the shilling at an average of 101.35 by mid-afternoon, which was only slightly weaker than the closing average of 101.30 recorded on Tuesday.

Traders said that there was continuing support from dollar remittances from the diaspora, while portfolio investors were also bringing in dollars.

“We had a fairly balanced market today, with support mainly coming from remittances. People are also well aware that Central Bank has enough reserves to iron out any volatility,” said a trader in a commercial bank.

Shilling liquidity was also fairly balance Wednesday, with CBK saying in a market alert that it was staying out of the repo market for the day.

READ: Shilling exposed as IMF withdraws dollar cover
The shilling has been one of the more stable African currencies in the last two years, with part of the support coming from the insurance against volatility that the CBK’s $7.24 billion foreign reserves offers, and the $1.5 billion standby IMF facility.
The disclosure on Tuesday that Kenya did not have access to the IMF facility since June last year (although it is principally still in place) came as a surprise to the markets, with the CBK and Treasury having not informed the public of the suspension of access.
An IMF team is in the country though to discuss a new deal to replace the facility that expires next month.