Kenya’s net international assets decreased by Ksh 87.1 billion ($ 769.7 million) in the year to September, the largest decrease ever, suggesting local financial institutions liquidated some of their overseas portfolios.
Net external assets (NFA) refers to the total external assets of the banks and the Central Bank of Kenya minus the external liabilities of the institutions.
“The net external assets decreased from 751.2 billion Ksh (6, USD 6 billion) back in late September 2020 to 664.1 billion Ksh (5.8 billion US dollars) by the end of September 2021, “said the Kenyan National Bureau of Statistics in its GDP report for the third quarter.
Stable or growing net international assets will be the relative value of the Kenyan shilling, while the opposite could lead to a depreciation of the local currency vis-à-vis others.
A stronger shilling will help lower import costs since shipping to Kenya a broad spectrum rum from consumers and capital goods such as petroleum products and industrial machinery.
A weaker shilling contributes to inflation, but can benefit certain actors such as exporters, whose goods are cheaper from the perspective of foreign buyers.
However, the net international investment position alone is not the only factor determining a country’s macroeconomic stability.
Assets indicate whether a country is a net creditor or a net debtor. Kenya was a debtor country between 1982 and 1992 when, according to the World Bank, its financial institutions owed foreigners more money than they owned overseas.
This is the sharpest decline in assets, from a low of. grew Ksh 30 billion ($ 264.9 million) in 1993, peaking at $ 885 billion in the first half of last year.
The Treasury Department announced the decline in Foreign assets in addition to a decrease in a decrease in the foreign exchange reserves of CBK returned in deposits of banks abroad.
The foreign exchange reserves of the CBK are usually issued when the institution intervenes to support the shilling or as a fiscal agent of the government to make payments to overseas lenders.
Rise of Kenya The appetite for international borrowing through the issuance of dollar-denominated bonds has increased in recent years, making debt servicing a major factor in changes in net international assets.
The weakening of the schilling is also likely to erode the wealth due to inflation g foreign currency debt of financial institutions.
The lo The kale currency depreciated from 100 units per dollar to 113 units per dollar in February 2020 – a month before the country registered its first case of coronavirus.
The pandemic caused the local currency to weaken significantly due to lower exports and major disruptions to economic activity, including severe restrictions in sectors such as tourism and transport.
The shilling has lost ground against most major currencies, including the euro, the British pound and the US dollar. < / p>
The devaluation continued even after the coronavirus-related restrictions were lifted, which led to a strong economic recovery.
“The economic recovery from the effects of the Covid-19 pandemic continued continued into the third quarter of 2021 as a result of the gradual easing of containment measures to contain the spread of the disease, “said KNBS.
” Real GDP grew i In the third year, up 9.9 percent in quarter 2021 compared to a decrease of 2.1% in the same quarter of 2020. “
KNBS said the performance was sustained by significant rallies in most economic activity in the third quarter of 2020.
Sectors that supported overall growth included manufacturing, which grew 9.5 percent, education (64.7 percent), transportation and warehousing (13 percent), accommodation and catering activities (24.8 percent), and finance and insurance (6.7 percent). .
“However, agricultural production was limited due to the drought conditions that characterized the quarter under review in most of the country,” said the KNBS.
“Agricultural, forestry and The fisheries sector shrank by 1.8 percent in the review, compared to a growth of 4.2 percent in the same quarter of 2020. “
The decline was reflected in the significant decline in fruit exports, sugar cane deliveries, and tea production Coffee exports, said the statistics agency.