FATF puts Kenya on grey list

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.