The Kenyan shilling exhibited a robust performance, recording a 1.8% gain against the US dollar on Thursday, February 1. This marked the fifth consecutive day of growth, reaching a historic high unseen since 2021, providing a welcomed relief for importers.
The recent upswing follows a challenging period in December 2023 when the shilling experienced a significant 21% depreciation. The current appreciation is set to ease the financial burden on importers, allowing them to spend less on imports.
Key contributors to this positive trend include a surge in tourism and an increase in diaspora remittances. Kenya's thriving tourism industry is poised for substantial growth in 2024, building on the Ksh333 billion generated in 2023. Additionally, Kenyans abroad are sending more money back home, contributing to the overall strengthening of the shilling.
President William Ruto's administration has strategically focused on leveraging remittances from Kenyans working abroad as a means to stabilize the shilling. Efforts to send more casual laborers to work globally aim to boost remittances and support the currency.
Reports suggest that the shilling's stability has also led to an uptick in export earnings, providing a positive outlook for the country's economic landscape.
While cautious optimism prevails, an economist warns against prematurely declaring this a trend. Nonetheless, in the short term, importers stand to benefit significantly from the newfound stability of the local currency.
Earlier in January, the shilling faced challenges, hitting an all-time low after crossing the 160-unit mark against the dollar. Factors such as rising external debt service obligations and increased import bills contributed to the depreciation.
The Central Bank of Kenya (CBK), in its weekly bulletin released on January 26, highlighted the shilling's relative stability against major international and regional currencies. The shilling traded at Ksh160.80 per US dollar on January 25, maintaining the CBK's statutory requirement of at least four months of import cover.
Internationally, the US economy's 3.3% annual growth in the fourth quarter of 2023 and a 0.03% strengthening of the US dollar index were noted. Furthermore, the increase in international oil prices, attributed to robust US growth and geopolitical risks in the Middle East, contributed to the positive trajectory. Murban oil price rose to USD80.72 per barrel on January 25 from USD78.47 per barrel on January 18.