The Central Bank of Kenya (CBK) took a decisive step on Tuesday, February 13, by establishing the US Dollar to Kenyan Shilling exchange rate at Ksh158.66, anticipating tomorrow's fuel price review by the Energy and Petroleum Regulatory Authority (EPRA).

CBK's action contrasts with the rates set by commercial banks and other financial institutions, ranging from Ksh156 to Ksh158, reflecting the strengthening of the shilling against the dollar.

Last week, CBK forecasted continued shilling stability throughout February and March, citing favorable diaspora remittances and a thriving tourism sector as contributing factors.

This announcement followed the shilling's remarkable performance, achieving a historic high since 2021 with a 1.8 percent gain against the dollar over five consecutive days, reversing a previous 21 percent decline recorded in December 2023. This surge provided traders with significant relief as import prices for various goods declined.

In a bid to fortify the shilling, CBK raised the base lending rate from 12.50 percent to 13 percent, aiming to attract foreign investors seeking higher returns and to stabilize the local currency.

EPRA and Exchange Rates

EPRA traditionally relies on the previous month's dollar-shilling exchange rate for its fuel price adjustments. For instance, on January 14, EPRA cited a December exchange rate of Ksh158.81 when announcing fuel prices for January 15 to February 14. However, this rate differs from CBK's rate, prompting scrutiny and calls for clarity from stakeholders, including Energy CS Davis Chirchir.

Chirchir questioned the discrepancy between EPRA's rates and those published by CBK, highlighting concerns about the impact on fuel procurement costs and consumer expenses. He emphasized the need for EPRA to align its rates with CBK's and pledged consumer refunds if discrepancies persisted.

February 14 Fuel Review

CBK reported an average dollar-shilling exchange rate of Ksh160 in January, raising questions about EPRA's upcoming fuel price adjustments and whether they will align with CBK's rate.

With international oil prices recently declining, Kenyans anticipate lower fuel prices. EPRA's adjustments, which previously reduced petrol and diesel prices by Ksh5 and kerosene by Ksh4.82 per liter, underscore the potential for favorable adjustments in the upcoming review.