For the past month, the Kenyan shilling has steadily gained ground against the dollar, marking a significant shift from its previous struggles.
Just weeks ago, the exchange rate hovered above 160 shillings per dollar, but now, it stands at 134 shillings per dollar.
President William Ruto hailed this appreciation as a sign of Kenya’s economic recovery, stating, “Kenya’s economy was in the trenches but I have saved it.
Now, as you can see, even the dollar price has gone down and things are in order.”
However, amidst the celebrations, there are growing concerns among Kenyans, particularly regarding the impact of the shilling’s rise on various sectors.
The decline in remittances from the diaspora has raised eyebrows, with February 2024 recording a 6.4% decrease compared to January.
The USA remains the largest contributor, but the appreciation of the shilling means recipients have less to spend or invest locally.
The Central Bank of Kenya’s decision to increase the Central Bank Rate (CBR) to 13% in February aimed to stabilize the shilling’s value against major currencies, especially after it fell to a low of Ksh.160 against the dollar in mid-January.
However, this move has left some stakeholders anxious, especially exporters and individuals with significant hard currency deposits.
Treasury’s decision to execute a buyback of the maturing $2 billion Eurobond and loans from international organizations injected confidence in the shilling.
Yet, concerns linger regarding Kenya’s overall economic health, with socio-economic policies and public debt challenges casting shadows over the currency’s stability.
Despite the shilling’s rebound, achieving a stable and respected currency requires a robust export-focused economy, a vibrant manufacturing sector, and prudent debt management.
Expanding tourism offerings and positioning Kenya as a health tourism destination could further strengthen the shilling’s fundamentals.
In essence, navigating these economic challenges will not only determine the fate of the Kenyan shilling but also shape the country’s socio-economic development trajectory.
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