The Kenyan Shilling has been predicted to stabilise further following the disbursement of a Ksh156 billion ($1.2 billion) loan from the World Bank.
According to analysts who spoke to Bloomberg, the loan acquisition from the multilateral lender is set to boost the country's foreign exchange reserves.
The Dollar inflows from the multi-billion loan are set to tame the local currency's volatility which has been witnessed in recent months.
"Factors driving the gains include the partial refinancing of its June 2024 dollar bonds, two successive interest-rate hikes in December and February and the recent approval of a $1.2 billion loan from the World Bank, which will boost foreign-exchange reserves," the experts stated.
While issuing the loan, the World Bank announced the money would help Kenya address its monetary pressures, especially on the foreign exchange and accelerate green initiatives.
"It has been prepared under an improved macroeconomic environment following government action to address the challenges that had overshadowed the economy, including tight liquidity pressures, depressed investor confidence and limited capital inflows," the World Bank noted in a statement.
As of Monday, June 3, commercial banks quoted the shilling at 130.00/ 131.00 against the greenbuck, the same as Friday's closing rate.
Kenya's local currency stability has also been boosted by the recent dollar inflow from diaspora remittances and revenue from exports, especially tea and coffee exports.
Other factors that could help the Kenyan shilling to strengthen against the Dollar include foreign currency inflows from Non-governmental organisations and subscription of government securities.
The projected stability of the Shilling comes days after the Kenyan currency gave up some of its gains due to foreign exchange demand by manufacturers and commercial banks.
Last week, the shilling hit the 133 unit mark before reverting to 130 this week against the American dollar.
There was high demand for the dollar by fuel retailers who sought to purchase petroleum from the oil-rich countries thus prompting a hike in Kenya Shilling-US Dollar exchange rates.
A resurgence of the Dollar against global currencies also contributed to the weakening of the Kenyan Shilling last week.
Meanwhile, a stronger shilling is expected to cut the country's debt significantly even as the country struggles with debt distress.
