Shilling Gain Cuts Kenya's Foreign Debt by 19%

Kenyans can expect some relief as the shilling continues to appreciate against the dollar, with the US Dollar going for 130.00 Kenyan Shilling today.

The valuation reflects a significant turnaround of the usd to ksh after a difficult first quarter of 2024. In January, the usd to ksh rate hit a high of 163.50 Kenyan shillings per US dollar. However, by April, it had strengthened considerably, reaching a low of 129.82.

This dramatic turnaround marks a major victory for the Kenyan economy.

As a result, the total value of external loans dropped from 6.2 trillion KSH in January to 5 trillion KSH, saving a staggering 1.1 trillion KSH.

This frees up significant resources for the government to invest in critical areas like infrastructure development, social programs, and healthcare and education.

Furthermore, the debt reduction will create more fiscal leeway for the government.


These changes will lead to more expansionary fiscal policies, such as increase in public spending or measures to stimulate economic growth. A strong currency is often seen as a sign of economic stability, and can attract foreign investors. This could be portfolio investment (purchasing stocks and bonds) or foreign direct investment (FDI) in Kenyan infrastructure and infrastructure sectors.

The appreciation of the shilling will also contribute to the stability of the exchange rate, which is key to financial stability and investor confidence.

Several factors have contributed to the appreciation of the shilling:

  • Central Bank Rate Hike:

The Central Bank of Kenya’s (CBK) decision to raise the benchmark interest rate (CBR) to 13% signaled its commitment to curb inflation and stabilize the currency. Higher interest rates generally attract investors looking for higher yields, increasing demand for the shilling (ksh to usd).

  • Eurobond issuance:

The $1.5 trillion Eurobond issue in February 2024 served two purposes. Not only did it raise funds to finance the flow of Eurobonds, but it also boosted confidence among investors and traders. This increase in confidence further strengthened the shilling. In addition, foreign investors needed Kenyan shillings to buy bonds, further increasing demand for the currency.

  • Oversubscription of the KSH 75 billion Infrastructure bond:

Oversubscription also played a role in the issuance of a separate KSH 75 billion infrastructure bond. Like Eurobonds, investors needed shillings to participate, which was further strengthened against the dollar by increased demand for shillings.

This oversubscription was interpreted as a positive sign for the Kenyan economy, attracting more investors and further strengthening the value of the shilling.

The impact of a stronger ksh to usd is a double-edged sword. On the one hand, it can lead to cheaper imports for businesses and consumers. This will translate to lower prices for goods and potentially reduce overall inflation. Imagine paying less for that phone you’ve been eyeing, or for groceries from abroad.

However, the flip side is that Kenyan exports become more expensive for foreign buyers. This could make it harder for Kenyan businesses, especially those in agriculture, manufacturing, and tourism, to compete in the global market, potentially leading to a decline in export revenue.

Furthermore, the impact on the trade and current account balances is uncertain. Cheaper imports will lead to a higher trade deficit as people buy more foreign goods. However, this could be offset by a decline in export revenue due to reduced competitiveness. This complex interplay can potentially widen the current account deficit, a measure of a country’s foreign trade.

However, there is a silver lining. A strong and stable shilling is often seen as a sign of economic health, and could attract foreign investors. These investors will be interested in Kenyan stocks and bonds, or they may even be able to invest directly in Kenyan infrastructure. This inflow of foreign capital will spur economic growth and development.




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