Uncertain outlook for East Africa as FX and fuel prices spook markets

East African markets are in a state of flux as volatile currency fluctuations and shifting petroleum procurement strategies impact the region's economic outlook. Daisy Anthea Nitwe, Country Lead for Derivatives and Structured Solutions at Standard Bank Group Uganda, shed light on key developments impacting Kenya and Uganda in a recent interview with CNBC Africa. The interview covered a range of topics, from IMF financing in Kenya to the effects of Uganda's new oil procurement method. Kenya recently received a significant financial boost from the IMF, with an augmentation to its ECF and EFF programs that includes an additional $932 million. The news has reaffirmed market confidence in Kenya's ability to repay its debts and has led to a rally in yields on Kenyan euro bonds. This boost in market sentiment is a positive sign for the country's economic stability. Despite the depreciation of the Kenyan shilling by 25% since the beginning of the year, renewed market confidence is expected to slow down the pace of depreciation moving forward. On the other hand, Uganda's currency, the shilling, is facing unexpected depreciation due to high demand from sectors such as manufacturing and oil marketing. Despite positive indicators like increased coffee exports, the shilling is struggling against market pressures. However, as the year-end approaches and remittances flow in, there is hope for a slight appreciation of the currency by the end of the year. In the realm of petroleum procurement, Uganda's decision to shift its oil purchases directly is causing ripples in the market. By bypassing middlemen in Kenya, Uganda aims to reduce costs and ensure a stable supply chain. While concerns about monopolies and inefficiencies have been raised, the move is generally seen as positive for oil market players. The new procurement method is expected to bring about efficiencies and cost reductions, potentially benefiting both suppliers and consumers in the long run. Looking ahead, market analysts are closely monitoring these developments to gauge their impact on the overall economic landscape of East Africa. With IMF financing bolstering Kenya's position and Uganda's oil procurement shift introducing new dynamics, the region's markets remain in a state of uncertainty. It will be crucial for policymakers and market players to adapt to these changes and navigate the challenges to ensure sustainable economic growth and stability.