Rédaction Africa Links 24 with Daily Nation
Published on 2024-02-15 21:00:00
The Kenya shilling has made headlines as it has bounced back from its sharp decline against the United States dollar, sparking excitement among many. This decline in the value of the shilling had been a cause for concern and was seen as a grim indication of the state of the economy. However, in a surprising turn of events, the shilling has just posted its strongest performance against the dollar in 12 years, with an exchange rate of between Sh152 and Sh157 per dollar, compared to the previous rate of 160 to the dollar.
Financial experts have attributed the stronger shilling to a boost in investor confidence, as significant inflows have helped to pay off the $2 billion (Sh313 billion) Eurobond. The decision to buy back some of the Eurobond has also calmed investor nerves. This remarkable performance of the local currency has wiped out the losses experienced earlier in the year and is the strongest showing since November.
Despite this positive development, it’s worth noting the irony that a weakening shilling should actually result in an increase in export earnings due to exchange gains, making Kenyan goods more competitive in the international market. The sharp decline of the shilling over the past three years has been a major concern for the government, as it has led to a rise in the prices of imported goods and services, ultimately eroding the purchasing power of the people.
In light of this, the Central Bank of Kenya (CBK) has been working diligently to stabilize the currency, with Governor Kamau Thugge holding talks with bank CEOs to address the mounting pressure. The CBK also raised the Central Bank Rate (CBR) from 10.5 to 12.5 per cent in an effort to target an average exchange rate of 155 to the dollar, further emphasizing the need for stability in the financial system.
The recent improvements in the exchange rate and the efforts to stabilize the shilling are positive indicators for the Kenyan economy, but the focus now is on sustaining these efforts to ensure continued stability. The stronger shilling and increased investor confidence are certainly welcome developments, but the government and financial institutions will need to remain vigilant to prevent any future sharp declines in the currency.
Overall, the recent performance of the Kenya shilling against the US dollar has been a cause for optimism, and if these trends continue, it could have a positive impact on the overall economic outlook for the country.
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