Central Bank of Kenya Governor Kamau Thugge announced on Wednesday that the cost of living is expected to continue improving as the financial pressures on the government ease and Kenya’s inflation rates continue to drop.
Thugge, while speaking to Reuters on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington, revealed that Kenya’s inflation rates would drop below the recently recorded annual rate of 3.6 percent.
According to Thugge, the government will also renew efforts to strengthen the shilling by ensuring that the foreign reserves do not sink further.
He revealed that the shilling would continue on its stability path against the dollar for the foreseeable future because the government had enough foreign reserves to cover the shilling against foreign currencies for approximately 4.3 months.
He added that the shilling is at appropriate levels after its world-beating gains this year and that policymakers are prepared to use record foreign reserves to defend the currency
Kenya’s current foreign reserves stand at Ksh1.1 trillion ($8.6 billion), representing a 4.3 months cover worth of imports.
This is even as the shilling continues to perform well at the exchange markets, particularly against the dollar, recording a 21 percent boost.
The shilling's ongoing strength makes it one of the best-performing local currencies globally this year, currently trading at Ksh 129 against the dollar. The shilling dropped from a high of Ksh160 at the beginning of 2024.
The Governor also noted that the government will undertake more interest rate cuts following similar cuts imposed on banks to enable more Kenyans to access affordable interest rates.
"It's the desire of everybody for interest rates to come down," Thugge told Reuters.
On Kenya’s renewed financial interest funding from the IMF, the CBK boss noted that Kenya had fulfilled all targets mandated by the International Monetary Fund in a review of its loan programme.
"We've achieved all that was needed for the reviews to be completed. Obviously, after the review there are still the targets for December," he added.
"It will depend on the balance of payments and needs, it will depend on the ambitiousness of the reforms that we agree, but definitely, we will have our relationship going forward with the IMF."
A staff-level agreement on a combined 7th and 8th review of Kenya’s programme is scheduled to go to the IMF's executive board for a sign-off on October 30, which will, in turn, trigger a payout of Ksh78.7 billion( $611 million).
