FATF puts Kenya on grey list
With Kenya looking to International Monetary Fund, World Bank and the European Union in efforts to exit Financial Action Task Force grey list, Uganda grapples with maintaining its investor confidence even after its removal from the grey list with concerns that this is largely driven by a weakening shilling even after maintaining its base lending rate at 9.5 per cent. To highlight some of the actions these countries are taking to remain competitive as well as market developments across East Africa, CNBC Africa is joined Phillip Ssali, Head, Corporate Sales & Global Markets at Standard Bank Group.
Wed, 28 Feb 2024 14:40:08 GMT
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AI Generated Summary
- The FATF grey list status of Kenya raises concerns about its economy and investor confidence, while Uganda, recently removed from the list, faces challenges with a weakening shilling despite maintaining its lending rate.
- Being on the grey list means enhanced scrutiny for entities to strengthen anti-money laundering and terrorist financing policies, but economic performance is also driven by fundamentals like investor sentiment, ease/cost of doing business, and real returns.
- Kenya has taken steps like amending the AML bill and securing IMF/World Bank support to exit the grey list, while Uganda's shilling woes stem from seasonal factors, export slowdowns, and investor portfolio adjustments seeking higher yields elsewhere.
- The Kenyan shilling saw a positive spike post-issuance of lucrative bonds, underpinning investor confidence and liquidity, with sustainability hinging on real yields and market sentiment. Currency movements in East Africa are influenced by investor sentiment, real yields, liquidity, infrastructure investments, commodity prices, and monetary policy decisions.
Kenya has found itself on the Financial Action Task Force (FATF) grey list, prompting concerns about its economy and investor confidence. Meanwhile, Uganda has been removed from the grey list but is grappling with a weakening shilling despite maintaining its base lending rate. To shed light on the actions these countries are taking to remain competitive and market developments across East Africa, CNBC Africa interviewed Phillip Ssali, the Head of Corporate Sales & Global Markets at Standard Bank Group. According to Ssali, being on the grey list entails enhanced scrutiny from FATF, urging entities to strengthen anti-money laundering and terrorist financing policies. However, being on or off the grey list doesn't solely determine an economy's performance. Fundamentals like investor sentiment, ease/cost of doing business, and real returns dictate how an economy fares. Ssali noted that Kenya's actions, such as amending the AML bill and garnering support from the IMF and World Bank, demonstrate a commitment to exit the grey list and sustain investor confidence. Conversely, Uganda's shilling depreciation is attributed to seasonal factors like dividend payouts, export slowdowns, and portfolio rebalancing by investors seeking higher yields elsewhere. On the other hand, the Kenyan shilling witnessed a positive spike post-issuance of attractive euro and infrastructure bonds, boosting investor confidence and liquidity. The sustainability of this shift will depend on real yields and market sentiment. Factors influencing currency movements in the region include investor sentiment, real yields, liquidity, infrastructure investments, commodity prices, and monetary policy decisions. As global interest rate cuts make emerging markets appealing, East African currencies will continue to be impacted by these dynamics.
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