Relief for Importers as Shilling Strengthens Against Dollar

The Kenyan shilling gained 1.8% against the dollar on Thursday, February 1, marking its fifth consecutive day of growth, a historic high since 2021.

This shift marked the end of a recent free fall, particularly in December 2023, when the shilling fell by 21%. This will benefit importers who can now spend less on imports.

The appreciation of the local currency was attributed to the increase in tourism and diaspora remittances.

Kenya’s tourism industry is on the verge of achieving a significant milestone, as it is anticipated to experience growth in 2024. In 2023, the sector generated Ksh333 billion and it is projected to increase further this year.

A photo of one hundred shilling notes


Xpress Money

Similarly, Kenyans in the diaspora have increased their remittance with most of them now sending more money back home.

President William Ruto’s administration is keen on relying on Kenyans working abroad as a strategy to stabilise the shilling. The government has thus been sending more casual labourers to work in different countries across the world hoping to increase remittances. 

It was reported that the stability of the shilling has contributed to an increase in export earnings.

The shilling made a significant gain in December 2020 during the pandemic era. This gain continued into 2021, with the shilling adding a 1.46% value against the dollar.

During this period, the local currency traded at Ksh109.44 against the dollar. 

“It would be premature to call this a trend,” an economist warned but maintained that in the short term, importers will benefit largely from the stability of the local currency.

In mid-January this year, the shilling dropped to an all-time low after crossing the 160-unit mark against the dollar. Rising external debt service obligations, coupled with an increase in import bills, have led to the depreciation of the shilling.

In its weekly bulletin released on January 26, the Central Bank of Kenya (CBK) stated that the Kenya shilling remained relatively stable against
major international and regional currencies during the week ending January 25, exchanging at Ksh160.80 per US dollar on January 25, compared to Ksh160.79 on January 18.

CBK added that the usable foreign exchange reserves remained adequate at USD7.017 million (3.8 months of import cover) as of January 25. 

“This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover,” CBK stated. 

In the international markets, the bulletin indicated that the US economy grew at an annual rate of 3.3 per cent in the fourth quarter of 2023. The US dollar index strengthened by 0.03 per cent against a basket of major currencies during the week ending January 25.

International oil prices increased during the week ending January 25, largely attributed to faster-than-expected US growth in the fourth quarter as well as continued attacks and geopolitical risks in the Middle East. 

Murban oil price rose to USD80.72 per barrel on January 25 from USD78.47 per barrel on January 18.

CBK Governor Kamau Thugge speaking at the Africa Climate Business Forum on November 2, 2023.


Central Bank of Kenya

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