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News & Knowledge

A review of Kenya’s economy: 2015 – A year of change?

1st February 2016

This report by MSI's Kenyan accounting member B.C. Patel & Co summarises the highlights of Kenya's economy in 2015.

2015 has been a year of mixed fortunes for business in Kenya. The year was characteristic of a volatile forex market with the Kenyan shilling losing significantly against the USD, the GBP and the
Euro. Though the shilling started the year strong exchanging below the Kshs 100 mark against the USD, the spiral effect of the devaluation of the Chinese Yuan in August caught up with the KES causing it to dip to 106 against the USD in September.

The rate marks the all time lowest exchange rate for the KES against the USD. The response by the Monetary Policy Committee of Central Bank to mitigate further depreciation of the shilling by adjusting the Benchmark interest rate pushed the bank rates upwards. This coupled with the enhanced domestic borrowing by the central government significantly pushed the interest
higher.

High inflation rates, the re-introduction of the Capital Gains Tax at 5% on capital gains made on real estate and stocks after years of its suspension which slowed down the NSE. The enactment of the Excise Tax Act introducing enhanced excise rate charges on water and juice and the KEBS implementation of the Pre-Export Verification of Conformity (PVoC) guidelines to Standards programme for all imports to Kenya have further dampened the business environment.

On the positive note however, the year has seen the government firm up focus on reforming the business environment in Kenya. This is marked by the launch of the Kenya Industrial Transformation Program (KITP), the enactment of the Companies Act 2015, the Special Economic Zones Act 2015, the Insolvency Act 2015 and the Business Registration Act 2015 all of which are likely to transform the Business environment and enhance the ease of doing business.

View the full report and review of Kenya’s economy in 2015

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