Expect volatility in the money market after Brexit – experts

June 24, 2016
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Equity Group Chief Executive James Mwangi says Kenya has built resilience in the micro economic environment and is prepared for any shocks that will be felt after the decision/FILE
Equity Group Chief Executive James Mwangi says Kenya has built resilience in the micro economic environment and is prepared for any shocks that will be felt after the decision/FILE

, NAIROBI, Kenya, Jun 24 – Expect volatility in the money market following Britain’s decision to exit the European Union (EU).

Speaking to Capital FM Business, ABC Capital Corporate Finance Manager Johnson Nderi says the uncertainty in Britain following the decision will see the sterling pound lose while the dollar strengthen in the short term which will affect other currencies including the shilling.

“Right about now, there is volatility in the market, I will attribute it to uncertainty largely in the financial market, anybody with leverage positions might have wanted to pare back the positions to minimize their losses,” Nderi said.

The pound collapsed to its lowest level since 1985 as the unit takes a beating on Britain vote to leave the European Union, in what critics warned would be a hammer blow to financial markets.

The shilling on the other hand ranged between Sh101.01 and Sh101.45 against the dollar as markets digest the Brexit developments.

He says however the decision will take about two years for Britain to finally exit the European Union.

In the long run Kenya will have to renegotiate new trade deals with Britain through bilateral talks either as a country on its own or through East African Community Bloc.

“Exports to the United Kingdom will not have a problem, Kenya or EAC as a bloc will start bilateral negotiations which will be better than the EU standards that has many standards, inhibiting exports, The main argument with Britain with the EU was that the EU market was over-regulated which stifled growth of small businesses,” Nderi explained.

Kenya already enjoys an agreement with the EU on trade through the East African Community.

The EU-EAC Economic Partnership Agreement covers trade in goods and development cooperation.

EPA has seen Kenya through the EAC deal signed in October 2014 enjoy duty free access of its products to the European Market.

“The London Nairobi talks or the London Arusha talks will determine whether Kenya can still enjoy duty free access of its products to the European Union, the exit will also see the EU revaluate its regulations which is a win- win for Kenya until then business will go on as usual,” he added.

The United Kingdom is the second largest economy in the EU.

UK is the second largest export destination for Kenyan goods in the European Union, with the value of exports at Sh40 billion in 2015.

Netherlands is the largest.

In 2011 the value of exports stood at Sh47 billion, 2012 at Sh40 billion, 2013 at Sh37 billion and 2014 at Sh35 billion.

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