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XINHUA NEWS SERVICE REPORTS FROM THE AFRICAN CONTINENT

 

Kenyan shilling at six-month high against
U.S. dollar on stronger inflows

NAIROBI (Xinhua) -- The Kenyan shilling hit a six-month high against the U.S. dollar on Monday as inflows from diaspora remittances surged.

The shilling stood at 100.38, data from the Central Bank of Kenya released on Monday shows, the highest level since Aug. 10, 2018, when it stood at 100.36.

Analysts attributed the surge to hard currency inflows from diaspora remittances and offshore investors’ buying government debt, coupled with thin end-month dollar demand from oil importers.

According to the central bank, diaspora remittances have been on the rise, up by 39 percent in 2018 to 270 billion shillings (2.7 billion U.S. dollars), and from 1.9 billion dollars of 2017.

The high remittances are attributed to increased uptake of financial products by the diaspora due to financial services firms, particularly banks.

The stronger shilling against the dollar has led to a pile-up in forex reserves, which stood at 8.14 billion dollars, having risen by 135 million dollars in January.

A stronger shilling means the apex bank does not have to sell dollars to stabilize the local currency in case it faces pressure from international currencies.
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UPDATES:

Kenya consider onshore forex bonds to support local currency

NAIROBI (Xinhua) -- Kenya is considering floating foreign currency-denominated bonds locally in order to support the Kenyan shilling, the country’s capital market regulator said on Friday.

Paul Muthaura, CEO of Capital Markets Authority (CMA), told journalists in Nairobi that the bonds will lead to additional foreign currency inflows into the country and strengthen the local currency.

"We are proposing the onshore foreign currency bond because it will also provide government with foreign currency to cater for the growing import bill," Muthaura said during the release of ninth volume of the Capital Markets Soundness Report for the fourth quarter of 2018.

By issuing debt in foreign currency such as U.S. dollars and euros locally, Muthaura said, Kenya will solidify its position as an international financial center.

According to the Central Bank of Kenya, the country’s foreign exchange reserves currently stand at 816.4 billion shillings (8.13 billion U.S. dollars), equivalent to 5.3 months of import cover.

Muthaura noted that the foreign currency debt instruments will ensure the country has adequate cover and buffer against short-term shocks in the foreign exchange market.

Luke Ombara, director of regulatory policy at CMA, said the government should also consider issuing offshore local currency bonds so as to raise funds in the international capital markets without being exposed to foreign exchange rate risks and volatility.

Ombara said that a number of developing countries such as Rwanda and India have already floated local currency bonds outside of their countries.

He noted that ideal bourses to issue offshore local currency-denominated bonds include the London Stock Exchange and the Irish Stock Exchange.

The CMA official noted that currently the amount of international funding channeled toward developing countries and emerging economies continues to grow and Kenya should take advantage of the trend to raise funds in the international capital markets to implement President Uhuru Kenyatta’s Big Four Agenda on universal healthcare, affordable housing, manufacturing and food security.

Ombara noted that the adoption of an appropriate mix and balance of foreign currency debts and local currency debts will ultimately promote the development of local capital and financial markets, further positioning Kenya as the heart of African capital markets.
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Kenya to issue green bond by end of 2019

NAIROBI (Xinhua) -- Kenya is on course to issue a green bond by end of 2019, a bankers’ lobby said on Monday.

Habil Olaka, CEO Kenya Bankers Association (KBA), told journalists in Nairobi that the industry is pushing for the floating of a green bond because it makes sense.

"Looking at the environmental, social and financial needs of both the country and the banking sector there is no better instrument to achieve sustainability like the green bond," Olaka during the rebranding of Remu Microfinance Bank to Key Microfinance Bank.

He said that given Kenya’s level of economic development, it is prudent for the financial sector to prioritize sustainability.

He noted that the green bond will be floated at the Nairobi Security Exchange under the Sustainable Finance initiative.

According to KBA, there are currently three different initiatives that are working in parallel to develop a green bond.

"Each of the initiatives have an equal chance of producing Kenya’s first green bond," Olaka said.

He added said that either an individual bank or several banks with a special purpose vehicle or a client of bank will be supported to issue a green bond which will be championed by the entire industry.

He added that actual size of the green debt instrument will be determined by the appetite of green investors.

Olaka said that the proceeds of the bond will go towards purchasing green assets that will help Kenya to mitigate or adapt to the effects of climate change.

The CEO said that the government is supporting the issuance of green bonds through a number of tax incentives.

             

 

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