NAIROBI, Aug 7 (Reuters) – Kenya’s central bank governor said on Wednesday that the country’s shilling currency had remained stable in the face of protests sparked by a plan to hike taxes and should shrug off recent credit rating downgrades.
Governor Kamau Thugge was speaking a day after the Central Bank of Kenya cut its benchmark lending rate by 25 basis points, the first cut in more than four years.
It was the first interest rate decision since President William Ruto bowed to pressure from protesters, scrapping the tax hikes and overhauling his cabinet amid calls for him to resign.
Rating agencies Moody’s and Fitch downgraded Kenya’s sovereign ratings following the withdrawal of the tax measures, saying the move could complicate the East African country’s fiscal consolidation efforts.
“We don’t expect that there’ll be much impact (on the shilling) … because of these downgrades,” Thugge said, adding that the central bank was seeing more foreign exchange coming into the economy than going out.
The shilling is up more than 20% against the dollar this year, after a rally that started in February when the government issued a new $1.5 billion Eurobond to buy back most of a $2 billion bond whose maturity in June had unnerved investors.
The country currently has no plans for another $1 billion bond buyback before the end of the year, the governor said, despite the World Bank saying in June this was possible.
“What we are trying as much as possible is trying to talk to our development partners, both bilaterals as well as multilaterals, to get additional external financing,” Thugge said.
Kenya has not made a decision on its future engagements with the International Monetary Fund after the current lending programme agreed in 2021 expires next year, the governor added.
The Central Bank Rate was reduced to 12.75% on Tuesday after inflation fell to 4.3% year on year in July, below the midpoint of the government’s preferred range of 2.5%-7.5%.
Kenya’s economy is projected to grow 5.5% in 2025, at a similar rate to this year’s 5.4% growth, Thugge said.
(Reporting by Bhargav Acharya and George Obulutsa; Editing by Alexander Winning, William Maclean)
