The Kenyan Shilling, in the last three days, recovered from its slump against the dollar, recording its highest valuation since June 2023.
According to the Central Bank of Kenya (CBK), the US Dollar exchanged at Ksh145 as of Thursday, February 15.
The sudden recovery alleviated fears among the investor community who had previously lamented that the local currency's continuous drop painted a grim picture for their businesses' prospects.
While many Kenyans were surprised by the shilling's resurgence, experts attributed the trend to the recent Eurobond buyback which instilled confidence amongst foreign investors in Kenya's capacity to service its debts.
"The buyout has restored confidence amongst investors to a large extent, especially amongst those apprehensive about investing in the country. Even people hoarding dollars are feeling they can trade without any mega upsets in the economy," governance expert Ben Mulwa told Kenyans.co.ke.
"There were rumours about certain assets being used as collateral. We saw this in Sri Lanka, and Zambia where key state facilities were taken over by lenders. These fears have been at their peak and tend to keep people apprehensive. Now that it has been regularised, I believe it will have a positive impact."
Although most Kenyans welcomed the news of the Shilling's recovery with open arms, not everyone shared the same enthusiasm. Some businesses that were riding on the depreciation of the local currency are staring at less promising months ahead.
Some of these businesses in question cut across the real estate, export and services industries as explained below;
Real Estate
Over the past year, landlords in posh estates capitalised on the constant shedding of the Kenyan currency and resorted to charging rent in dollars.
A report published by Knight Frank covering the period between July and December 2023 showed that landlords rented office space at USD13 per square metre.
In most instances, developers are forced to take out loans, most of which, are denominated in dollars as financiers seek to shield themselves from currency depreciation.
Mulwa opined that with the Kenyan Shilling's recent recovery, tenants are likely to benefit significantly as they will expect the rent to remain at the same rate.
"That transition in upmarket, you saw a lot of people collecting rent in dollars, they were being greedy. If you charged 1,000 dollars (Ksh145,500) in rent in Runda a month ago, the tenant will expect the rate to be the same," Mulwa stated.
"It's a loss to the landlord and a gain to the consumer. In net terms, the landlord is someone who would have otherwise collected an extra amount," he added.
Export
Some of the exporters who benefited from the shedding of the Shilling are likely to experience a less bumper period since the trade is dollar-denominated.
For instance, in the tea sector, the country made over Ksh29.7 billion between February to March 2023 compared to the Ksh26.9 billion earned in the same period in 2022. At the time, the Kenyan Shilling was trading at Ksh127 against the Dollar compared to Ksh113 in 2022.
A similar effect is expected to be witnessed in the coffee, flower and avocado industries.
Kenyans Working for International Organisations
Kenyans employed by international organisations are also likely to be less enthusiastic about the current trend.
Most of them are typically paid in Dollars. With the Kenyan Shilling appreciating, they are likely to bank less than they did when the local Shilling was performing poorly.
For instance, if an employee was paid USD1,000 per month in December 2023 when the exchange rate was Ksh160, they would earn Ksh7,000 less today.
Caveat
Mulwa, however, added that importers would be the biggest beneficiaries in the market as Kenya relies on imports to meet its basic needs. Hence the impact of the Shilling will have a ripple effect on basic commodities.
"This is a major reprieve for importers as we are a net import economy, we import even toothpicks. One of the things that has sustained products, is the impact of the dollar. We are not able to produce enough maize, sugar and other products," he explained.
"Importers suffered a lot during the past months, hence the gains should be passed on to the buyer immediately. We are expecting going forward, the prices of basic commodities will significantly come down."
