CENTRAL BANK OF KENYA
Remarks by:
DR. HARON SIRIMA, OGW
DEPUTY GOVERNOR
CENTRAL BANK OF KENYA
DURING THE LAUNCH OF THE 2015 FOREIGN INVESTMENTS
SURVEY
Hilton Nairobi Hotel
May 12, 2015

Cabinet Secretary to the National Treasury;
Chief Executives of State Agencies and Private Enterprises;
Representatives of Media Houses;
Ladies and Gentlemen.
1. Welcome to the breakfast meeting to kick off the 2015 Foreign
Investment Survey under the Enhanced Data Dissemination
Initiative Project. This project was initiated in 2010 with the objective
to improve the quality of data through statistical surveys, such as
the one we are launching this morning.
2. The purpose of this meeting is to raise awareness among the
enterprises that will be covered by the survey to ensure its success. It
also provides an opportunity to share our experience on past
surveys and receive feedback.
3. Comprehensive, accurate and timely data is a prerequisite for
better policy and strategic decision making, particularly in the quest to
attract foreign direct investment to Kenya. It is therefore important
that the exercise is carried out flawlessly. The data collected through
past surveys has been incorporated in the Balance of Payments
statistics and also enabled the compilation of Kenya’s International
Investment Position (i.e. the stock position foreign assets and
liabilities).
4. Ladies and Gentlemen, Kenya has made good progress in
improving the quality of its Balance of Payments statistics. This would
not have been achieved within the set timeframe without the technical
and financial support extended by the World Bank, the International
Monetary Fund and the Department for International
Development (DfID). The Macroeconomic and Financial
Management Institute of Eastern and Southern Africa
(MEFMI) has also been instrumental in providing the necessary
software for processing the data generated through the surveys and
in capacity building both at the Kenya National Bureau of Statistics

(KNBS) and the Central Bank (CBK). Indeed, the 2015 Foreign
Investment Survey will be conducted and financed exclusively by
both KNBS and CBK.
5. While the overall position on Kenya’s Balance of Payments has been
positive, the current account has weakened over time on
account of both rapidly growing capital imports associated with
the momentum of economic growth. Kenya’s export growth has been
sluggish while the tourism sector, our traditional source of foreign
exchange earnings, has been reflecting negative growth rate.
According to the latest Economic Survey, Kenya’s current account
deficit stands at 10 percent of GDP, financed mainly through capital
and financial inflows. The widening current account deficit continues
to exert pressure on the Kenya Shilling exchange rate.
6. Over the past four months, the Kenya Shilling exchange rate
to the US Dollar has come under unusually intense pressure
on account of a strong US Dollar and enhanced seasonal
corporate demands. The strengthening of the US Dollar globally
largely reflects the strong recovery of the USA economy, the uncertainty
around the timing of the first interest rate increase in the US following
the tapering of Quantitative Easing (QE), expectations of lower
interest rates in the Eurozone following adoption of QE by the
European Central Bank in late January 2015, and the weak Eurozone
growth recovery. During the period, the Kenya Shilling exchange
rate against the US Dollar depreciated by 5 percent. At the
Global Market it is quite volatile with many countries
experiencing strong capital outflows. The Nigerian Naira
(9%), Uganda Shilling (9%), Tanzania Shilling (4%), Ghanian
Cedi (20%) and even the Euro (11%) were hard hit.
7. What is the Central Bank doing to stem volatility? First, the
Bank adopted a tight monetary policy operations stance to
minimise any likelihood of arbitrage activities between the interbank
and foreign exchange markets – the average interbank rate now

stands at 10.4 percent. This is in excess of 250 basis points above
the CBR. Second, the Bank continues to intervene in the foreign
exchange market through direct sale of foreign exchange to
commercial banks both to ease demand pressures and drain
Kenya Shilling liquidity. In addition to dampening volatility, the
interventions slowed down the rate of depreciation of the exchange
rate. The Bank also enhanced the prudential guidelines of banks
on foreign exchange dealings to promote transparency and safeguard
the integrity of the financial market. The Bank has and will continue to
actively use moral suasion with the banking industry to stem
expectations.
8. Going forward, the intense seasonal demand pressure on the
Kenya Shilling exchange rate is slowly dissipating though there is
evidence of speculation in the foreign exchange market. In response,
the Bank will scale-up OMO to tighten liquidity further to stem
expectations. The resilient diaspora remittances and recovery of
the global economy will support exchange rate stability. In addition,
the Central Bank’s foreign exchange reserves coupled with a
precautionary facility from the IMF are adequate to stem volatility.
The Central Bank will continue to monitor developments in the foreign
exchange market but allow genuine demand and supply factors to
determine the level of the Kenya Shilling exchange rate. Finally,
measures to promote exports including foreign direct
investment are critical to the long term stability of the Kenya Shilling
exchange rate.
9. In closing, let me take this opportunity to thank the over 300
private enterprises that responded to the year 2013 foreign
investment survey questionnaires. The response rate of 75
percent was impressive and we look forward to better this performance
in this year’s survey. The time spent building this critical information
base is for our mutual benefit and the people of Kenya.

10. It is now my pleasure to invite the Cabinet Secretary, National
Treasury to make his remarks and official launch the 2015 Foreign
Investment Survey.
Thank you.