•CS Kuria argued that global market principles were inherently stabilizing, benefiting the Kenyan market without significant local intervention.
•The CS attributed the rise in the shilling to market speculation, hoarding, increasing Eurobond loans, and the ongoing debt crisis.
Image: MOSES KURIA/X
Public Service, Performance, and Delivery Management CS Moses Kuria has weighed in on discussions regarding the strengthening of the Kenyan shilling against the US dollar.
On Wednesday Kuria argued that global market principles were inherently stabilising, benefiting the Kenyan market without significant local intervention.
“There is nothing we have done fundamentally in one week, it is only that the market fundamentals are right. We promised Kenyans that we would not lie to them, ours would just be to tell the truth…the economy is rebounding on its own,” he explained during an interview on Citizen TV.
The CS attributed the rise in the shilling to market speculation, hoarding, increasing Eurobond loans, and the ongoing debt crisis.
He noted that both the Central Bank of Kenya and the government are actively addressing these issues.
The CS also challenged the notion that the Kenya Kwanza regime's actions were responsible for the abrupt shift in the shilling's value from around 160 to 140.
He emphasized that the shilling was naturally aligning itself with the global market once all relevant factors were in place.
“Things are looking up not because of a story, but because figures are telling us that and science is right," Kuria said
Going further and regarding the recent Eurobond repayment, Kuria mentioned that it influenced the rise of the shilling by stabilising the market and alleviating debt concerns.
He clarified that widespread anticipation of the government needing dollars to settle the Eurobond led to a hoarding of the dollar in the country, resulting in a decline in the value of the shilling.
“The Eurobond is not due but it was important to pay off so that it calms the market. People were speculating; they were saying that the government would come and mop up all the dollars that were there in the market to pay off the Eurobond, so people began to hold on to dollars so that they could cash out when the government came to mop up the dollars to pay the Eurobond,” he explained.
“It sends a message to the speculators that we are not going to do that..so those guys have been forced to offload them hence why shilling is taking its shape," he added.
The former Gatundu South MP commended the President William Ruto-led administration for giving priority to Eurobond repayment and praised the CBK Governor Kamu Thugge for taking steps to transparently communicate the status of the country's economy.
“Just like we agreed on unga, fuel…we also said that if it is weak, let it be weak, no point of makeup, so the makeup fell off and we allowed the shilling to stabilize," Kuria highlighted.
“The shilling was up because of speculation, now it is finding its true value. That is the good thing about not fixing the exchange rate artificially."
Treasury CS Njuguna Ndung’u had earlier explained why the shilling has strengthened against the dollar over the past few days.
During the National Executive Retreat in Naivasha, the CS said that potential investors shied away because the country had not resolved the Eurobond issue.
Ndung'u said the Market speculated the government would go to the market to buy dollars to try and benefit.
"We noticed that however much we tried to talk about the strategy to resolve the Eurobond, there were always some doubts because a big portion especially our microstructure of the market believed that the government would still go to the market to buy dollars to effect payments of the Eurobond," he said.
"That is why all of a sudden the market coordinated itself to speculate on the dollar and they were buying as many dollars as possible to try and benefit from the time the government goes into the market."
He said that the treasury established that after the Eurobond was in the Forex Bureau.
"The market was acquiring a waiting option, to resolve the Eurobond. We needed a mechanism to dislodge the market from that option," he added.
The Kenyan Shilling has continued to significantly gain against the dollar.
As of Tuesday, February 20, the Kenyan Shilling was being exchanged at 142.81 per US dollar according to the Central Bank of Kenya.
The US dollar had risen from an average exchange rate of Sh125 against the shilling in the first quarter of 2023 to Sh162 posted in January 2024.
On January 15, the shilling officially crossed 160 unit points against the US dollar, the lowest level on record.
The Central Bank of Kenya blamed the depreciation of the shilling on the $2 billion (Sh300 billion) Eurobond.
The depreciation made imports more expensive while at the same time pushing up Kenya's debt.
However, the country on Tuesday last week successfully issued a new Eurobond worth $1.5 billion (Sh238 billion) to buy back the inaugural one due on June 24.
The National Treasury said the new loan is divided into three instalments has a weight average life of six years and is expected to mature in 2031.
The bond is priced at 10.37 per cent, the highest rate an African state has ever offered.