The shilling could slide to more than 160 units against the US dollar in the coming months, a new forecast by a majority of analysts and economists working with leading global banks, consultancies, and think tanks shows, a situation likely to exert renewed pressure on prices of goods and services.
The Kenyan currency has gained about 10 percent of its value against the greenback since it hit a record low on January 25.
Issuance of the Eurobond helped the Treasury to repay $1.44 billion of the $2 billion of the debut 10-year issue which will mature in June, helping cool jitters amongst international investors over a sovereign default.
“The successful sale of foreign-currency-denominated bonds in mid-February lessened the default risk, boosting the shilling to a six-month high,” analysts at Barcelona-based FocusEconomics said in a March 2024 outlook report based on feedback from panellists drawn from eight firms.
“Our panel sees the KES [shilling] weakening from current levels by year-end, though stable fiscal and current account deficits should add support.”
Easing of default fears coupled with a surprise rise of base interest rates payment has served to raise confidence in Kenya’s asset classes such as bonds, with the hope of attracting dollar investments into the country.
The shilling is hovering around 145 units against the dollar. The currency has been largely stable since the successful issuance of the Eurobond which dissipated the possibility of significantly dipping into forex reserves to repay the maturing debt.
The Kenyan currency is, however, projected to come under fresh pressure as corporates look for dollars to pay dividends in coming months with further demand coming from importers.
