The Kenyan Shilling has exhibited remarkable strength against the US dollar in recent weeks.
This positive development has ignited optimism for a potential economic recovery in Kenya. As of March 19, the official exchange rate stood at 133.99 Shillings per dollar, according to the Central Bank of Kenya. Notably, some currency traders are offering even more favourable rates, selling the dollar for as low as 132 Shillings. A stronger Shilling presents a two-sided coin for the Kenyan economy. On the positive side, it benefits Kenyans who travel internationally or enjoy imported goods. These products become more affordable as the Shilling gains value relative to the dollar.
Conversely, Kenyan exporters face a potential drawback. Their products become relatively more expensive in the global market, hindering their competitiveness. This recent appreciation of the Shilling follows a period of depreciation. Throughout the first quarter of 2023, the average exchange rate hovered around 125 Shillings per dollar. This trend culminated in a record low for the Shilling on January 15, 2024, when it surpassed 160 Shillings against the dollar.
The Central Bank of Kenya attributed this depreciation to the issuance of a $2 billion Eurobond (approximately 300 billion Shillings). This not only increased import costs but also added to Kenya’s national debt burden. However, a significant turnaround occurred in February 2024 with the successful issuance of a new Eurobond valued at $1 billion. The National Treasury plans to utilize a portion of this new loan to repurchase the initial Eurobond maturing in June 2024. This buyback will be executed in stages, with a total cost of $750 million. The new Eurobond boasts a maturity of six years (2031) and is offered at a record interest rate of 10.37% for African issuances.
In light of these developments, the National Treasury, through Principal Secretary Chris Kiptoo, has encouraged Kenyans to relinquish their stockpiled dollars. He assures them that the risk of Eurobond failure has been mitigated and expresses firm belief in the continued strengthening of the Shilling.
Last time I made a comment…
Last time I made a comment to recognize the new government efforts being made to create a solid financial structure, some people were yelling garbage. Nothing good comes easy and this government is cleaning up the background mess to make this happen. Bravo to Ruto government. Skeptics are haters!