Shilling Exchange Rate Closes January Down 2% Against Dollar

The value of the Kenya Shilling has depreciated by two percent against the US Dollar since the beginning of the year.

This depreciation is attributable to an increased demand for the dollar in the market.

On the first day of the year, the shilling was trading at 157.45 units, but by February 1, 2024, it had depreciated to 160.67 units – according to data from the Central Bank of Kenya (CBK).

The high cost of imports, particularly in the oil and energy sectors, continues to exert pressure on local currencies. Additionally, the persistent current account deficit and the government’s debt servicing needs have further strained the country’s foreign exchange reserves.

Despite these challenges, the shilling has been on the winning streak against the dollar for four consecutive days up to February 1, trading at 160 units.

This stability could be attributed to increased inflows. CBK data indicates that usable foreign exchange reserves increased by Ksh.32 billion to over $7 billion (Ksh.1.1 trillion).

However, the impending maturity of the 2014 $2 billion Eurobond continues to pose a challenge for Kenya, especially given the high interest rates in international markets.

In 2023, most countries in sub-Saharan Africa were unable to access the Eurobonds market due to persistently high interest rates and challenging economic conditions in the region.

Investors attributed the rise in interest rates to the high-risk premium in the region, driven by elevated inflation, concerns over debt sustainability, and weakening local currencies.

But on January 30, President William Ruto announced that Kenya plans to re-enter the international capital markets to refinance its debt.

He said Kenya has received approval from Citi Bank and Standard Bank to initiate a buyback in the first quarter of the year.

“What they have recommended is we do a buyback in February, March and then we go to the market,” said Ruto.