Treasury CS Ndung'u Sheds Light on Why Ksh Strengthened Against the Dollar



Over the past few days, Kenyans have seen the local Shilling significantly gain against the Dollar. Currently, as of Tuesday, 20th February, the shilling is trading at Sh142.81 per US dollar according to the Central Bank of Kenya. 

Treasury CS Njuguna Ndung’u provided insight into the recent strengthening of the shilling against the dollar.

Addressing attendees at the National Executive Retreat in Naivasha, the CS indicated that the unresolved Eurobond matter deterred potential investors. He highlighted market speculation suggesting that the government might intervene by purchasing dollars to gain advantages.

"We noticed that however much we tried to talk about the strategy to resolve the Eurobond, there were always some doubts because a big portion especially our microstructure of the market believed that the government would still go to the market to buy dollars to effect payments of the Eurobond," Njuguna Ndung'u said.  

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"That is why all of a sudden the market coordinated itself to speculate on the dollar and they were buying as many dollars as possible to try and benefit from the time the government goes into the market."

He said they came to that conclusion after the Eurobond was in the Forex Bureau.

"The market was acquiring a waiting option, to resolve the Eurobond. We needed a mechanism to dislodge the market from that option." 

The Kenyan Shilling has continued to make significant gains against the US dollar.

According to the Central Bank of Kenya's report on Tuesday, February 20, the exchange rate stood at 142.81 Kenyan Shillings per US dollar.

This marks a notable increase from previous rates, with the US dollar climbing from an average of Sh125 against the shilling in the first quarter of 2023 to Sh162 in January 2024. 

On January 15, the shilling hit a record low, crossing the 160-unit point against the US dollar.

The Central Bank of Kenya attributed this depreciation to the impact of the $2 billion (Sh300 billion) Eurobond. The depreciation not only made imports costlier but also contributed to the escalation of Kenya's debt.

However, last Tuesday, the country successfully issued a new Eurobond worth $1.5 billion (Sh238 billion) to repurchase the initial bond set to mature on June 24.

Also Read: Kenya Secures New Eurobond to Buy Back Old One

The National Treasury disclosed that the new loan is structured into three installments, with an average life of six years, maturing in 2031.



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