Bloomberg News

Morgan Stanley Sees Kenya Shilling, Ghana Cedi Easing on Deficit

January 14, 2013

Pressure on Kenya’s shilling and on Ghana’s cedi may ease as both countries manage to reduce their current account deficits, offsetting volatility caused by national elections, according to Morgan Stanley.

While Kenya’s currency could depreciate in the run up to the scheduled elections in March, “our view that the elections will likely be successfully executed gives us enough comfort to maintain our view that a post-election foreign exchange rally is likely,” Andrea Masia and Michael Kafe, Johannesburg-based economist at Morgan Stanley, wrote in a report today. The analysts see the shilling “only depreciating modestly to” 88 a dollar this year and 90 by the end of 2014.

In Ghana, macroeconomic conditions that deteriorated before elections last month “are likely to improve this year -- even if only marginally so,” the analysts wrote in a separate report. The reduction of the country’s current-account deficit from 13.5 percent of gross domestic product to 9 percent this year will benefit the cedi, which Morgan Stanley now sees at 2.05 a dollar by the end of this year, compared with an earlier forecast of 2.2.

Elections scheduled for March 4 in Kenya, East Africa’s biggest economy, will be the first since a disputed 2007 vote sparked two months of ethnic and political reprisals that killed 1,100 people and forced 350,000 to flee their homes. Presidential elections in Ghana last month saw the ruling National Democratic Congress party win a second term.

Kenya’s current account deficit narrowed from 12.1 percent of GDP in 2011 to an estimated 9 percent last year, and will be at 8 percent this year, according to Morgan Stanley. Ghana’s current account gap could reach as low as 7 percent of GDP by 2014.

The shilling was down 0.1 percent to 86.80 a dollar as of 3:42 p.m. in Nairobi. The cedi was trading 0.1 percent weaker at 1.9045 a dollar as of 12:43 p.m. in Accra.

To contact the reporter on this story: Chris Kay in Abuja at

To contact the editor responsible for this story: Vernon Wessels at

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