Even as the Kenyan Shilling continues to rebound against the United States Dollar, the Central Bank of Kenya Governor Kamau Thugge has dismissed any further fluctuations of the local currency.
Thugge in a post June 2024 Monetary Policy Committee (MPC) press conference projected the exchange rate will remain steady, dismissing any further appreciation or weakening of the Shilling.
In his explanation, the CBK Governor clarified that Shilling's performance was majorly market-determined and that the Central Bank would intervene only when necessary.
“We don't see significant weakening or significant strengthening, there should now be stability in the exchange rates,” Thugge reiterated.
He noted that the continuous inflow and outflow of foreign exchange would ultimately determine the level of the exchange rate.
“We will intervene when there is a need to, if there is excessive volatility on either side, but we will let the market determine that and we will see how the current, capital and financial accounts perform," the CBK Governor assured.
During his presentation, Thugge attributed Shilling's recent stability to several factors including increased foreign exchange inflows and a positive impact on monetary policy measures.
Other factors were the recent reforms in the foreign exchange market and the buy-back of the June 2024 Eurobond.
According to the CBK boss, the Shilling had strengthened against the US Dollar by about 17 per cent to become the best-performing currency globally.
"When we move closer at home and look at the performance of other currencies in the region, still, we have a very strong performance followed by Botswana's Pula," Thugge commented.
"Just of note is the weakening of the Egyptian Pound as well as the Nigerian Naira which had strengthened at some point but displayed some weaknesses," he added.
As of Wednesday, June 6, commercial banks quoted the shilling at 130.00/ 131.00 against the greenback, the same as Tuesday's closing rate.
The recovery of the local currency kicked off in late January this year and has continued to rally against major world currencies.
In April, the central bank revealed the appreciation of the Shilling cut the country's debt by Ksh1 trillion as it lowered the debt servicing cost.
Of this, Kenya's debt to Ksh10 trillion from Ksh11 trillion with Thugge attributing the stability of the Kenyan currency to the issuance of infrastructure bonds, the partial buy-back of the $2 billion bond and increased remittances.
"We estimate that we have reduced the shilling-denominated dollar debt by Ksh1 trillion. Consider that our external debt is around $38 billion and we have reduced the exchange rate from around Ksh160 to Ksh130. That is around Ksh30," Thugge explained.
That transaction that we did with the Eurobond which removed the risks has actually saved the country huge amounts of debt and when you see the overall debt you should see a reduction in terms of shillings," he added.
