The Kenyan Shilling has significantly strengthened against major currencies, with most local banks buying the US dollar at Sh135.8 to sell at Sh140.8.
As of Thursday, February 15, 2024, Bank of Africa in its ‘daily exchange’ rates, bought US dollar at Sh148.10, and sold the same at Sh152.9. On the same day, the lender’s buying price of the British Pound Sterling (BPT) was at Sh182.81, sell at Sh195.83.
The Central Bank of Kenya (CBK) says the Kenyan Shilling is being exchanged at Sh153.20 per US dollar, which is a dramatic gain, especially going by the fact that as at January 30, 2024, it had surged from an average exchange rate of Sh125 and touched a low of about 163 against the US dollar.
Treasury Principal Secretary, Chris Kiptoo attributes the gains to renewed investor confidence, spurred by the government’s proactive measures, notably the redemption of the Sh316 billion (2 billion) Eurobond due in June this year.
Kiptoo said foreign investments in the Central Bank of Kenya’s Sh70 billion infrastructure bond is another contributing factor to the shilling’s gain. As the shilling continues to appreciate, he added, Kenyans should seize the opportunity to divest.
“Sell your dollars and get back to business. Don’t engage in speculation anymore. The issue has been addressed. There is now confidence, and you can see the shilling’s improvement,” he said.
The PS also supported the government’s decision to issue a new Eurobond worth Sh234 billion ($1.5 billion), which garnered over $6 billion in offers. The new 7-year debt, set for repayment in three installments with the final payment due in 2031, offers a strategic approach to managing Kenya’s debt, which currently exceeds Sh11 trillion.
“We’ve attracted quality investors committed to the long term, bolstering confidence in Kenya as a favorable business destination,” he said.
For government, a strong Kenyan shilling provides a much-needed respite for the exchequer and offers relief in debt servicing while mitigating credit pressures.
According to a business and development consultant, and economic analyst, Ephraim Njega, the market fundamentals haven’t shifted. He wrote on x, formerly Twitter: “What we are witnessing is the effects of a panic market. There has been no significant increase in exports, remittances, or decrease in imports, nor any major new sources of foreign direct investment. Last I checked, we haven’t started exporting copious amounts of crude oil.”
X user, John Sydney3, said: “My guess is 110-125 ideal for this year. Even that increase to those levels was abnormal… the reversal is proportionate, it was all green for long time.”
The shilling gain also sparked a reaction from Mohamed Tache Dida, X user, who wrote: “If you are still holding onto your dollars, please get rid of them. At this rate Kenyan shilling will be the currency for global transaction.”
It is hard to predict the end game, and perhaps when the shilling will stabilise, but Mr Njega, an economist, notes that despite recent fluctuations in the Kenyan shilling’s exchange rate, there are no big changes to the country’s economic outlook that would warrant such a significant shift.
“The current exchange rate volatility is likely due to short-term panic selling by some Dollar holders, which is likely to settle down in the coming months. Once the dust settles, expect the Shilling to settle at around 150 to the USD,” he wrote on his wall.
