The Kenyan shilling has defied expectations, transforming into the best performing currency in Sub-Saharan Africa. According to a recent World Bank report, the Kenyan shilling is the best performing currency in the subcontinent, as it has recorded an appreciation of 16% so far this year. The Kenyan shilling now reigns supreme, dethroning the Zambian Kwacha, which had held the best-performing currency title since last year after its central bank raised interest rates. However, after strengthening by 14% by mid-February, the Zambian kwacha lost some ground and recorded a year-to-date appreciation of 2.4% as of mid-March.
A report by the East African showed that the Kenyan currency recently recorded a 15-month high at Shs 128.66 per dollar. This gain resulted from inflows from agriculture exports amid reduced demand for dollars among importers.
Since January, the Central Bank of Kenya which on Friday
announced the new rate, has used real traded rates in the interbank market to
compute the official rate, enhancing the official rate’s conformity with market
conditions.
“We have seen some inflows during the week from tea exports.
The market’s sentiment around the shilling has also been positive due to
expected loan inflows from the World Bank, and the early settlement of the
Eurobond that was to fall due this month.” Said a commercial bank forex dealer.
The Bank’s governor Kamau Thugge, also relayed that the
Shilling’s gain against the Dollar is partly due to tightened monetary policy
which aided in the improvement of investment inflows into the country.
A surge In transfers from the diaspora has boosted the
shilling as well. Remittances increased by 20% to $1.6 billion (Sh205.8
billion) in the first four months of the year from $1.34 billion (Sh172.4
billion) in the same period of 2023.
The growth of the Kenyan Shilling since the start of the
year
In April, the World Bank ranked the Kenyan shilling as the
best-performing currency in Sub-Saharan Africa. A report by the global lender
revealed that the incremental value of the shilling was directly linked to the
hike in the base lending rate by the Central Bank of Kenya (CBK).
This ranking followed the Shilling’s 12 years high gain
which was reported in February. The Kenyan Shilling experienced a significant
resurgence owing to a wave of investor confidence that followed the government’s
large inflows to settle the $2 billion Eurobond.
The currency at the time was trading below Sh153.75 at some
commercial banks which was the strongest it had been since November 2023, as it
has managed to wipe out all the losses incurred during the year.
At the start of February, Kenyan banks had quoted nothing
surpassing Sh164.50/$1 dollars. Also, in January, the Kenyan Shilling
experienced a gain of 0.73 percent against the US dollar. The currency had not
experienced this sort of gain in over 3 years, as the Shilling went from 161.36
to 160.19.
This denotes that the currency has from the start of the
year gone from Shs 161/$ to now Shs 128.66/$, a far cry from an earlier
assessment where hope for the country’s currency seemed bleak, following a
report.