The Kenyan Shilling has experienced significant fluctuations against the US dollar in recent days. On Wednesday, the Central Bank of Kenya reported the shilling at Sh156.70 per US dollar, only to see it further strengthen to 153.20 on Thursday, as confirmed by various forex bureaus. This comes after a surge in the US dollar from an average exchange rate of Sh125 in Q1 2023 to Sh162 in January 2024, marking a historic low for the shilling.
The depreciation of the shilling has been attributed to the $2 billion Eurobond issued earlier, making imports more expensive and elevating Kenya’s debt levels. However, a positive turn occurred as Kenya successfully issued a new $1.5 billion Eurobond, which the National Treasury plans to use to buy back the inaugural bond set to mature in June 2024. Financial analysts are cautious about predicting the shilling’s future movements, emphasizing the uncertainty of the currency’s sustained strength.
Despite the fluctuating currency, some financial observers point to the potential positive impact on the economy. If the Kenyan shilling continues its upward trend, it might take one or two months for this to reflect positively on Kenyan goods. The ongoing concern lies in the wide margin between imports and exports, with hopes for a recovery in exports to influence the shilling’s performance positively.
Meanwhile, Deputy President Riagthi Gachagua encourages those holding onto dollars to sell them promptly, expressing confidence in the shilling’s continued gain against foreign currencies. On social media, Kenyans are closely monitoring the currency’s movements, reflecting the public’s interest and concern over the economic situation.
In response to the shilling’s volatility, the Central Bank of Kenya has taken measures to stabilize the exchange rate. The CBK has intervened by purchasing US dollars, aiming to curb excessive fluctuations. Despite the shilling’s recent rally driven by foreign inflows into domestic debt and the resolution of the Eurobond, the CBK’s intervention signals a desire for gradual and stable changes in the currency’s value.
The central bank’s actions reflect a careful approach to maintain stability in the exchange rate, only intervening when necessary rather than specifying a preferred currency level.
