“I want to encourage Kenyans, if you’re holding any dollar because your fear the Eurobond, please note that now the risk of failure to settle the Eurobond is gone and so you need to get back to business sell your dollars and get back to business don’t do any speculation anymore,”
The Central Bank of Kenya does not set the exchange rate; it is determined by the market, or supply and demand. Individual forex bureaus and commercial banks set their own rates, which are held to reasonable levels of variance and margins due to competition in the market.
The weakening of the Kenyan currency is attributed to high public debt, depleted government revenues, and the strengthening of the US dollar in the global market, mainly as a result of several crises, including Ukrainian and Middle East conflicts.
Kenya is also a net importer of goods, meaning it imports more than it exports, thus affecting the inflow of foreign currency. The continuous rally of the Kenya shilling over the last week has signalled a significant tide turn for the currency which was expected to shed more value this year after the shilling hit an all-time high of over 160 against the US dollar.
A trajectory that now seems to change with the inflow of dollar-denominated support from the International Monetary Fund (IMF) which disbursed USD 684 million on January 18, followed by another disbursement from the Trade Development Bank on January 24 to the tune of USD 385 million. The Africa Development Banks set to further increase dollar liquidity in the country by an additional disbursement of USD 88 million.
It is these funds that experts now say have given the shilling a shot in the arm against the dollar. The shilling, which stood at Ksh.161 against the US dollar just three days ago, has regained value to close the day at an average of Ksh.153 to the dollar on Thursday, indicating a significant gain that experts are now attributing to a lack of incentive for investors to hold on to the green buck.
The panic sell of the US dollar seen in the markets, however, is expected to see the Kenyan shilling gain further against the dollar. Experts are projecting that the shilling might hold steady at 140 to the dollar in the second and third quarter, but they remain cautious that the shilling's rally may not last as long as the macro-economic fundamentals remain the same.
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