Outlook for Kenya’s shilling in 2024

Kenya’s shilling has faced a challenging period, depreciating by at least 30 per cent against the US dollar over the past year and a half. The impact of rising interest rates in the United States has further heightened concerns about the future trajectory of the currency. In a recent interview, financial analyst David Kingoo shed light on the factors contributing to the shilling's decline and outlined potential strategies for stabilization. Despite the tumultuous economic landscape, there are glimmers of hope on the horizon. Kingoo highlighted the disruptive events of the past year, such as the COVID-19 pandemic and political instability, as major drivers of the shilling's depreciation. These factors disrupted international business activities and constrained the country's ability to balance imports and exports effectively. While cautious optimism remains for 2024, Kingoo expressed reservations about the lack of bold government interventions to bolster the currency. One key measure Kingoo proposed was enhancing currency transactions with major trading partners to mitigate the demand for dollars. He also emphasized the need to scrutinize the country's import patterns, particularly regarding items like oil and steel, which significantly impact the exchange rate. By aligning fiscal and monetary policies to empower the local economy, there is potential to counterbalance the currency fluctuations stemming from external factors. The outlook for the global economy in 2024 presents a mixed bag of challenges and opportunities for the Kenyan shilling. While geopolitical conflicts and supply chain disruptions pose risks, the anticipated stability and resilience in the global economic landscape could bode well for currency stabilization. Factors like the war in major oil-producing regions and the overall economic growth trajectory will influence the shilling's performance in the coming months. When assessing the sectoral landscape in Kenya, Kingoo identified agriculture as a potential winner due to favorable weather conditions and the expected bumper harvest. However, the manufacturing sector faces headwinds stemming from high energy costs and currency disadvantages. As the country navigates through these dynamics, strategic sectoral policies and investments will play a pivotal role in determining winners and losers in the economic landscape. In conclusion, the path ahead for Kenya’s shilling in 2024 is rife with challenges, but there are avenues for resilience and growth. By implementing targeted measures to address currency vulnerabilities, aligning policies with global economic trends, and fostering sector-specific strategies, Kenya can navigate the uncertainties and pave the way for a more stable and robust financial ecosystem.