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INFLATION | The Kenya Shilling (KES) Rises to 15-Month High, Now Best Performing Currency in Africa

Thanks to income from agricultural exports and a decline in importers’ need for dollars, the value of the Kenyan shilling (KES) against the US dollar has reached its highest point in 15 months. Early in 2023, Kenya’s dollar scarcity caused a 12% decline in value over the preceding year. As a result, in March 2023, the value of the Kenyan shilling was KES 147 to the US dollar.

The Kenya Shilling has gained 17% against the US dollar from the year’s beginning [2024], making it the best-performing African currency during this time. The Central Bank of Kenya (CBK) reported the currency rate on June 14, 2024, at an average of 128.66, a level last seen on March 8, 2023, according to the East African daily. At the end of the week, the newspaper conducted a spot check on a number of commercial banks and discovered that they were buying and selling dollars to retail customers at prices ranging from KES 125 to KES 126.60 and KES 130.65 to KES 131.60.

“During the week, there were some inflows from tea exports. The early settlement of the Eurobond that was due this month and anticipated loan inflows from the World Bank have also contributed to the market’s bullish feeling toward the shilling, according to a commercial bank currency dealer.

Kenya released a $1.5 billion Eurobond earlier in February [2024], using the proceeds to partially repurchase 2024 notes that were scheduled to mature in June 2024. This helped allay concerns that the government would not make good on its debt commitments. Furthermore, Kenya was granted a substantial loan by the World Bank in May 2024 as part of the Fiscal Sustainability and Inclusive Green Growth Development Program Operation. After the CBK buys the dollars from the National Treasury, this loan will increase its official foreign exchange reserves, enhancing its authority as the monetary regulator to safeguard the Shilling against volatility.

An increase in remittances from the diaspora has also helped the Kenya Shilling. Remittances rose from $1.34 billion (KES 172.4 billion) in the first four months of 2023 to $1.6 billion (KES 205.8 billion) in the first four months of this year [2024], a 20 percent rise. The governor of the CBK, Kamau Thugge, claims that tightening monetary policy has also contributed to a rise in foreign investment into the nation.

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