CIC was at 3.50 jana. So close to dipping below the listing price...

C/A is not out of the woods
The strong growth in import demand, partly driven by credit, explains the deterioration of the C/A in 2011. We expected a slowdown in credit growth, owing to tight monetary policy, to help temper import demand. However, the C/A deficit widened in 1Q12 owing to strengthening import demand, following signs of a slowdown in 4Q11, and weak export performance. The stronger imports can be attributed to a 16% YoY increase in the oil price and strong capital equipment and machinery imports, largely due to ongoing infrastructure projects. Kenya’s largest export, tea, which generates one-fifth of export earnings, was undermined by frost, which reduced output by 20%. An added risk to the C/A is subdued tourism receipts and horticulture earnings, owing to economic weakness in the EU, the biggest market for these exports. All these headwinds affirm our view that the shilling is too strong at KES83/$1 given the fundamentals, and is likely to weaken to KES85-90/$1 before stabilising.