The EFG Hermes Research has reported that the Kenyan currency’s depreciation will most like persist to the end of the year, bringing the value of the Kenyan shilling to Ksh 150 per US dollar.
Bloomberg has reported that since Dr Kamau Thugge took office as the governor of the central bank in mid-June this year, the unit has lost one percent. Currently trading at Ksh 144.41 per US dollar, the shilling has hit a record low of 15 percent this year with the drop being attributed to the insufficient dollar supply.
‘’We are still seeing some pressure on the shilling, the current account has narrowed but still remains quite significant,’’ said the director of frontier banks at EFG Hermes Research, Ronak Gadhia during an interview in Nairobi.
He added that Dr Thugge’s move of raising the rates was a positive indicator of the shilling’s stabilization. He however noted that some depositors still had doubts regarding the Kenyan shilling and were therefore reluctant to let go of their Forex holdings.
‘’We haven’t seen that dollarization reverse because there’s still some uncertainty as to whether the shilling has stabilized… a lot of depositors are still playing it safe ,’’ he stated.
Read Also: CBK Calls on Kenyans to Unlock Dollars Stored in Deposit Accounts
According to Gadhia, significant inflows of foreign currency from syndicated loans along with funding from the World Bank, International Monetary Fund and Eurobond issuance, Kenya will have enough cash to pay off its first $2 billion (Ksh 283.7 billion) Eurobond that is expected to mature in June 2024.
‘’Its absolutely critical they pay it up because that would send a strong signal that Kenya’s dollar situation isn’t as bad as it was perceived to be earlier this year,’’ he said.
Mr. Gadhia added that should Kenya default in its payment, borrowing costs will be raised which will lead to losses for local-currency investment portfolios. There would also be an increase in deposit rates leading to further margin pressure thereby causing higher lending rates and non-performing loans.
Subscribe to Switch TV for more exciting content
The Kenyan shilling crossed the 140-mark against the US dollar in June this year becoming Dr. Kamau Thugge’s first test as the then new Central Bank of Kenya governor.
