For the tenth day in a row, the Kenyan Shilling (Ksh) strengthened against the dollar to exchange at 156.70 on Wednesday, February 14.
The strengthening of the Shilling meant that Kenyans who were hoarding dollars risk incurring losses should the trend continue.
For example, a Kenyan who has USD1000 dollars by the start of February would have traded the cash at Ksh163,000. Currently, the amount exchanges at Ksh156,700.
With President William Ruto’s administration reiterating that the depreciation of the Ksh had been tamed, Kenyans started trading their hoarded dollars to prevent further loss.
Speaking to Kenyans.co.ke, Economist Churchill Ogutu remarked that while it was true that should the Ksh continue gaining strength, hoarders would suffer losses, there was not enough evidence suggesting that the strengthening of the Shilling was permanent.
“From a short-term perspective, based on the money that is coming in and there is not much import demand, definitely that will prop the Shilling,” he told Kenyans.co.ke.
“From a long-term perspective, as the Shilling starts strengthening, the demand will start picking up and this will lead to the weakening of the Shilling one way or another.”
Economist Churchill explained the Central Bank of Kenya's (CBK) February decision to increase interest rates by 0.5 per cent to 13 per cent partly contributed to the Shilling gaining strength.
He added the fiscal measure had directly contributed to attracting dollars into the market due to portfolio influence.
Additionally, Kenya has been receiving loans from the World Bank and International Monetary Fund which have boosted the country’s foreign reserves and subsequently propped the Shilling.
Churchill explained that the developments were advantageous in the short term but President William Ruto’s administration ought to institute proper policies and measures to ensure long-term strengthening of the local currency.
“We should expect a reprieve of some sort but from a fundamental perspective I do not think we have boosted our structural competitiveness,” he explained.
One of the ways to achieve long-term sustenance, according to Churchill, is through supporting the nation's exports to be able to attract more dollars.
Economist Vincent Kimosop speaking on the matter indicated that not everyone was offloading their dollars due to the recent appreciation of the Ksh.
"We have a free-floating regime of Forex and there are different reasons why people keep money. This include; speculative, precautionary and contingency," he explained.
He explained that there were even a section of Kenyans holding on their dollars with the hope that the Shilling would spiral again.
