Diaspora Remittances – February 2013

A remittance is money sent by a person in a foreign land to his or her home country. Due to the huge sums involved, remittances are now being recognized as an important contributor to the country’s growth and development.

The Central Bank of Kenya conducts a survey on remittance inflows every month through the formal channels that include commercial banks and other authorised international remittances service providers in Kenya.

Commentary on Remittances for February 2013:

Remittances to Kenya sustained an upward momentum in the month of February, 2013 to record inflows amounting to USD 102.37 million compared to USD 102.97 million in January 2013 and 103.97 in February 2012. The 12 month cumulative average flow was USD 98.6 million in February 2013 compared to USD 98.7 million in January 2013 and USD 80 million in February 2012.

Remittance Inflows by Source Market:

Remittances from North America accounted for 48 percent of the total inflows and marginally declined to USD 48.82 million compared to USD 51.72 million in January 2013. Inflows from Europe and rest of the world improved by 4.6 percent and 4.4 percent to USD 29.04 million and USD 24.51 million respectively.

©Central Bank of Kenya.

Value Of A Friend.

“A friend in need is a friend in deed”; so says the old adage. Most often we tend to take our friends for granted and never really take time to evaluate them and find out how valuable they are to us. Maybe just out of curiosity; what could be the market value of your best friend if they were to be listed at the stock market today?

Unlike company shares that can be valued at the stock market, friends are real assets whose value cannot be expressed in monetary terms. You can only estimate their value when in times of difficulties, everyone gives you a cold shoulder and your friend is the only person you can count on.

Friends are made and dropped along the path of life; anyway, who has managed to keep their nursery school friends till today?-Very few of course. This explains why sometimes life seems to be so void currently as compared to the good times in our past days. Ever heard of buddies talking of “old good days”? Those old good days would have never been there anyway without the friends who made them good.

Think of how life would have been without your childhood friends to play with; your teenage friends to go through the adolescence nightmare together; your youthful friends to enjoy college life with or your old age friends to remember the “old good days” with!

CBR Rate Retained at 9.50%

The Monetary Policy Committee met on 12th March, 2013 to review market developments and evaluate the outcomes of its monetary policy stance since its January 2013 meeting.

The Committee noted that inflation had stabilised within the Government medium-term target of 5 percent while exchange rate stability was
sustained. Specifically, the Committee observed and analysed the following positive outcomes in the market since
its last meeting:
Both overall and non-food-non-fuel month-on-month inflation measures remained within the Government medium-term target in January and February 2013.
Month-on-month overall inflation increased from 3.67 percent to 4.45 percent during the period mainly reflecting increases in
the prices of seasonal food stuffs and fuel, and a fall in the base price in February 2012.

However, non-food-non-fuel inflation, which measures the impact of monetary policy, declined from 4.51 percent to 4.46 percent during the period. The predicted favourable weather conditions coupled with a non-inflationary credit growth are expected to offset the impact of rising international oil prices, and hence support a low and
stable short-term outlook for inflation.

The exchange rate remained stable; it fluctuated within a narrower range of between Ksh.86.24 and Ksh.87.63 for the US Dollar in February 2013 compared with a range of between Ksh.86.08 and Ksh.87.61 in January 2013. By the time the MPC had itsbMarch meeting, the exchange rate was fluctuating around Ksh.85.30 indicating a return of confidence.

Forex Trading – Basic Terms

To understand forex trading, just like any other discipline you need an in-depth understanding of the basic terms used in the field. Here are some of the terms you should acquaint yourself with as you venture into forex trading:

(a)Forex exchange market:
This is a market where one currency is exchanged for another. For instance one trader can be having the Kenyan shilling and the other has the US dollar; the platform where they meet to exchange their currencies is what is referred to as the foreign exchange market. Also known as the FX or Foreign exchange market.

(b)Exchange rate:
This refers to the price at which one currency is exchanged for another. For instance, $1 could be exchanged for ksh. 87.41; then the ksh.87.41 becomes the exchange rate between the Kenyan shilling and the dollar.

(c)Foreign exchange reserves:
The holdings by a given government of other countries` currencies. In the Kenyan context, foreign exchange reserves include all other currencies that are held by the Central Bank of Kenya apart from the Kenyan shilling.

(d)Foreign Exchange Controls:
These are controls imposed by the government on the purchase or sale of foreign currencies. These regulatory controls are introduced by the government in order to protect the local currency from appreciating or depreciating so much to an extent detrimental to the national economy.

(e)Retail foreign exchange platform:
This is the speculative trading of foreign exchange by individuals using electronic trading platforms. To participate in the retail FX trading platform, you need to have a personal computer, fast internet access and a forex account opened with one of the numerous forex brokers online.

(f)Foreign exchange risk:
The risk that arises from the change in price of one currency against another. The price may change due to changing economic factors in either of the countries whose currencies are being traded or on other international economic changes.

(g)Foreign exchange company:
This refers to a broker that offers currency exchange and international payments.

(h)Bureau de change:
This refers to a business whose customers exchange one currency for another.

The above form just a fraction of the terms you need to know when trading in the FX market, and as stated, they are but the basic ones only.

County Governments’ Revenues

With the new Kenyan county government system being effective after the general elections which jForeignust ended; focus now shifts to the budgets for the financial year 2013/2014 which must incorporate the county government system. Of concern here is the source of revenues for the county governments to run their activities.

The first source of revenue for county governments as provided for in the constitution is the national government. Chapter 12 of the Kenyan constitution, article 202 (1) states that, “Revenue raised nationally shall be shared equitably among the national and county governments.” Article 202 (2) further states that, “County governments may be given additional allocations from the national government share of revenue, either conditionally or unconditionally.”

Taxes imposed at the county level are another source of funds for the county governments. Article 209 (3) of the Kenyan
constitution states that;
“A county may impose:
(a)Property rates;
(b)Entertainment taxes; and
(c)Any other tax that it is authorized to impose by an Act of Parliament.”

“The national and county governments may impose charges for the services they provide.” – Article 209 (4) of the constitution. This therefore means that not all services provided by either the national or county government shall be free. The charges imposed on the benefit enjoyed from such services will also form part of the revenue for the county and national governments depending on the government imposing the charges.

“The taxation and revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.” – Article 209 “5” of the constitution. The overall national economic development should therefore be the guiding principle even as the county governments look for ways of raising revenues to promote development at the county level.

Finally, “There shall be established a Revenue Fund for each county government, into which shall be paid all money raised or received by or on behalf of the county government, except money reasonably excluded by an Act of Parliament.” – Article 207 (1) of the constitution.

Uhuru Muigai Kenyatta..Congratulations!

After four days of stalled business activities in Kenya as people waited for the presidential election results, Uhuru Muigai Kenyatta was finally declared the winner. This however was not to go unchallenged as the CORD coalition presidential candidate Raila Odinga said his coalition would go to court to petition against the integrity if the tallying process of the votes.

The period to that declaration was marked with uncertainty and many businesses remained closed for the fear of the unknown. But now that the 4th president of Kenya is known, and peace is still maintained in the country, businesses should resume to normalcy this week. This is however pegged to the outcome of the petition to be raised by the CORD coalition.

During the four days waiting period, the shilling remained volatile moving up and down depending on the how fast vote tallying was done and results released. A collapse of the electronic transmition system of the provisional results also contributed to a temporary weakening of the shilling during the period. Now that all is done, the shilling is expected the continue strengthening due to the prevailing peaceful economic conditions.

The stock market however defied all the odds to maintain its upward trajectory during the 4 days tallying period. Volumes traded remained low though. It is therefore expected to shoot higher up after this whole process from increased investor confidence on the peaceful investing environment.

If the petition by CORD fails, Kenya’s next president shall be sworn in on the 26th of March 2013. The swearing-in ceremony is scheduled to take place at Moi Kasarani International stadium in Nairobi the capital city of Kenya.

From FieCon-sult we congratulate the president elect and wish him all the best in his term on office.