Treasury Principal Secretary Chris Kiptoo on Wednesday, warned that Kenyans hoarding dollars risk incurring more losses after the shilling posted its strongest intra-day gain against the dollar for the first time in over a decade.
Cause of dramatic rise: Kiptoo attributed the shilling's dramatic rise to investors' confidence drawn from the government's move to buy back the Ksh316 billion (USD2 billion) Eurobond maturing in June this year.
"I want to encourage Kenyans that the risk of failure to settle for the Eurobond is gone. Sell your dollars and get back to business. Don't do any speculation anymore,” Kiptoo advised.
"The issue has been addressed. There is now confidence and you can tell the shilling is beginning to improve. As of this morning, I was told it was trading at 151 units and yesterday it was at 157, and previously it was at 160 and that is very good news," he added.
In the latest Central Bank of Kenya data, the shilling is currently trading at 153 units against the green buck, hitting its strongest streak since November last year.
The other factors that have boosted the shilling include foreign investments in the CBK's Ksh70 billion infrastructure bond.
Govt strategies: While defending the government's move to sell the new Eurobond worth Ksh234 billion (USD1.5 billion), Kiptoo stated the securities had attracted more than USD6 billion in offers.
The hike in subscriptions was due to investors’ confidence in Kenya’s economic and debt management strategies.
Kiptoo added that the fear of Kenya defaulting on the Ksh316 billion Eurobond had been eliminated following the issuance of the new Eurobond.
"We did a roadshow and we explained to investors our economic situation and plan and gave them all the information they needed, and they believed in our story," the PS remarked.
"We got quality investors who are going to stay for the long term and are not going to go to the second market. This is a confidence boost to us because everyone now believes Kenya is good for business."
The new 7-year debt is set to be repaid in three instalments with the last one repaid in 2031.
Effects of strengthening shilling: With Kenya's debt surpassing Ksh11 trillion, the exchequer can now sigh a breath of relief as a stronger shilling will offer the government relief in offsetting the credit.
A stronger shilling guarantees flexible and lower debt servicing as Kenya offsets loans in dollars. Reports indicate that within the past week, the debt service costs were reduced by Ksh144.8 billion.
Analysts are, however, sceptical of the shilling's dramatic gain, questioning whether the government's recent fiscal measures are long-term.
