Kenya’s Monetary Policy Pays Off as Treasury Finally Tames Dropping Shilling

The Central Bank of Kenya on Friday, February 9, announced that the Kenyan shilling was expected to continue stabilising in February and March this year.

According to CBK, the stability was attributed to favourable diaspora remittances, a recovering agriculture sector and a recovering tourism industry.

The improvement was also attributed to inflows from foreign investors who have shown interest in buying government infrastructure bonds and a slowing importer demand for hard currency.

As of Friday, February 9, the commercial banks quoted the shilling at 159 units against the dollar, compared with Thursday’s closing rate of 160 units, exhibiting a significant improvement.

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


Central Bank of Kenya

Data from CBK depicts that remittances increased by 4.0 per cent to USD4,190 million in 2023 from USD4,028 million in 2022.

In its statement, CBK stated while the shilling has stabilised, it had initially been expected to fall further due to the demand for dollars to support debt service.

Further, it was expected that higher-for-longer global interest rates, low foreign direct inflows, high import bills and sovereign credit rating could also contribute to its weakening.

On February 7, CBK Governor Kamau Thugge noted that the recent hike in the base lending rate from 12.50 per cent to 13 per cent was among the monetary policies aimed at strengthening the shilling.

“There is a need to adjust the monetary policy stance to address the pressures on the exchange rate and mitigate second-round effects,” CBK’s Monetary Policy Committee (MPC) noted in its meeting earlier this week.

“The MPC stands ready to further tighten monetary policy as necessary to ensure price and exchange rate stability are achieved,” Thugge stated.

Thugge in the MPC meeting acknowledged that there were concerns over the repayment of the Ksh321 billion (USD 2 billion) Eurobond, maturing in June, which poses risks to the shilling, but dismissed claims that Kenya could default on its repayment.

“We have the money that is coming from the international institutions and the risk of the Eurobond will be eliminated and that should contribute to the strengthening of the shilling,” Thugge said.

A photo collage of CBK Governor Kamau Thugge speaking during the Africa Climate Business Forum on November 3, 2023 (left) and former CBK Governor Patrick Njoroge holding bank notes.




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