The Kenya shilling has sunk past 160 to the US dollar. Many people are predicting that the shilling could again lose half its value, as it did in 2023, and sink past 200. They are wrong.
Kenya has to repay a $2 billion Eurobond loan in August. Foreign investors are worried that Kenya might default so they are selling Kenyan assets to get their money out of the country.
To make matters worse, the United States has raised interest rates on its own Treasury bills which has made bonds from weaker countries less attractive.
This perfect storm has put immense pressure on the shilling, which has only been partially neutralised by President Ruto's tax rises which, although unpopular, have reduced the budget deficit.
But the Kenya economy is still strong and predicted by the World Bank to grow by over five percent this year. Depreciation has actually helped exporters, farmers and the tourism industry. If Kenya successfully repays the Eurobond, which seems likely, then the shilling will bounce back
Perhaps it is not a good idea to bet that the shilling will appreciate substantially but it will certainly stabilise in 2024.
Quote of the day: "Act as if what you do makes a difference. It does."
William James
The American psychologist was born on January 11, 1842
