Diaspora remittances to Kenya is expected to fall to its lowest as the consequences of lockdown in Europe due coronavirus. Diaspora remittances stood at Sh280 billion last year.
Recently the remittances have become the largest contributor to forex reserves, which the Central Bank of Kenya (CBK) uses to stabilise the currency.
UNCERTAINTY
With the rising uncertainty on global markets, the CBK has indicated that it was seeking to purchase Sh40.5 billion from banks in the next four months to bolster its dollar reserves which stood at Sh8.4 billion as at March 13.
According to an investment firm Cytonn Investments, with Europe feeling the effects of coronavirus pandemic, the decline in economic activities globally will result into a massive reduction in disposable incomes
“This coupled with increased prices of household items abroad might see a reduction in money expatriated into Kenya,” said Cytonn report.
Immediately the first case of coronavirus was reported, the stock markets declined with stocks such as Safaricom and Kenya Commercial Bank declining by 5.4 per cent and 7 per cent respectively in a day.
Trading in the Nairobi Security Exchange 20 was halted on March 13, after the NSE 20 dropped more than 5 per cent as per the provisions of rule 9.4.1 (ii) of the NSE Equity Trading Rules.
EUROBOND YIELDS
On the bond front, Eurobond yields increased significantly, an indication that investors are now attaching higher risk premium on the country due to the anticipation of slower economic growth attributable to locust invasion.
According to Cytonn, coronavirus has disrupted supply chain with the manufacturing sector suffering heavily as imports from China account for approximately 21 per cent of Kenya’s total imports.“The low supply of imports from China as well as South Korea especially in terms of electronics could see process rise to exorbitant levels,” said the Cytonn report.The Kenya Association of Manufacturers has warned that the outbreak could cause a shortage of intermediate goods used to manufacture products that are exported. NEGATIVE IMPACT According to a report by the Kenya Private Sector Alliance (KEPSA), 61 per cent of businesses surveyed reported that the coronavirus has had a direct negative impact on their businesses.KEPSA warns that if the situation gets worse most companies will ask employees to work from home thus negatively affecting business in the service sector. There is also likelihood of stock outs and delayed deliveries due to lockdown, reduced demand of export products and capital flow and increased […]
