State of the Kenyan shilling

The Kenyan shilling (KES) has experienced a significant depreciation against the US dollar, currently trading at approximately KES 129.55 to 1 USD as of November 25, 2024. Despite efforts by the Central Bank of Kenya (CBK) to stimulate the economy through rate cuts, the shilling continues to struggle due to multiple factors impacting the economy. Ronny Chokaa, Senior Research Analyst at AIB-Axys Africa, sheds light on the structural and systemic issues within Kenya's economy that are contributing to the depreciation of the Kenyan shilling. Structural issues such as the current account deficit and global economic trends are key drivers affecting the exchange rate. In efforts to address this imbalance, measures such as import substitution and export promotion initiatives are being considered. Despite the challenges, the shilling remains relatively stable compared to the previous year, showing resilience in the face of economic headwinds. The interview also delves into the impact of the US Federal Reserve's monetary policy and the recent cancellation of the Adani deal on the Kenyan markets. Additionally, the conversation touches on the Central Bank's mitigation strategies, including rate cuts, and the reluctance of commercial banks to reduce lending rates. Looking ahead, the outlook on the Kenyan shilling remains moderately stable, with no significant short-term or medium-term risks anticipated. With adequate foreign reserves and a favorable inflation rate, the shilling is expected to maintain its stability in the near future. While challenges persist, the Kenyan economy demonstrates resilience and potential for growth amidst a complex global economic landscape.