Eye on Kenya shilling performance

Kenya's local currency, the shilling, has experienced a remarkable transformation, shifting from being one of the worst performing currencies to emerging as one of the most stable currencies globally. In a recent interview with CEO of Elim Capital, Willian Odhiambo Ramogi, on CNBC Africa, the discussion centered around the surprising performance of the Kenyan shilling and its implications for the country's economy. Ramogi expressed optimism about the sustainability of the shilling's stability, attributing it to the resolution of political turmoil and improved economic prospects in the country. He highlighted that barring any unforeseen shocks, the current stability is likely to persist. The positive outlook on the shilling's performance is reinforced by its trajectory in recent months, where it has shown resilience against major world currencies, trading at 129.20 to the US dollar. The shilling's appreciation by 21 percent year to date is a testament to its strength and stability. The stability of the shilling holds significant implications for Kenya's debt situation. Ramogi explained that as a considerable portion of the country's debt, such as the funds borrowed for projects like the Standard Gauge Railway, is denominated in US dollars, fluctuations in the shilling's value directly impact the debt burden. A stable shilling ensures a more favorable debt situation, as the debt remains stable in value and the interest rates are not adversely affected. Moreover, a stable currency leads to more predictability in terms of import costs, contributing to a better inflationary environment in the country. The appreciation of the shilling, while beneficial for debt management, may pose challenges in terms of export competitiveness. A stronger shilling typically makes exports less attractive on the global market. However, Ramogi pointed out that Kenya's key exports, such as tea, coffee, and manufactured goods, have established strong market positions and long-standing relationships with buyers. Therefore, even with a stronger shilling, the impact on export volumes is expected to be limited. While the competitive landscape may shift slightly, Kenya's exports are unlikely to face significant setbacks due to the currency appreciation. In conclusion, the remarkable performance of the Kenyan shilling reflects positive economic developments in the country and sets a promising tone for its future stability and growth. The shilling's resilience against global challenges positions Kenya favorably in the international financial landscape, offering stability and predictability for investors and policymakers alike.