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How the Kenya Shilling became the best performing currency in Africa

11/04/20242 minute read
How the Kenya Shilling became the best-performing currency in Africa

Like the rise of the Zambian Kwacha last year, the Kenyan shilling has its monetary authority to thank for this feat. The World Bank attributes the shilling’s success story directly to the CBK’s decision to raise the base lending rate. This move, while seemingly straightforward, triggered a domino effect of positive outcomes. In February, the Kenyan shilling recorded its strongest intra-day gain against the dollar in the last 12 years. Higher interest rates attracted investors, boosting their confidence in the Kenyan economy. This confidence translated into a surge in demand for the shilling, driving its value upwards, which directly boosted the currency’s value.

The positive effects extend beyond the currency market. A stronger shilling reduces Kenya’s debt burden. Still, in February, the Kenyan government received significant inflows to pay off the $2 billion Eurobond. As the shilling gains value, the cost of servicing foreign currency debt decreases. This frees up valuable resources for the government to invest in critical areas like infrastructure and social programs. The boost in currency value also had a positive effect on Kenya’s stock market. In March, the Kenya shilling rebounded to an eight-month high. The Nairobi Securities became the best bourse in Africa on dollar returns.

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