Why That Surge Of Shillings On Dollars Was Artificial

Kenyans Warned of Increased Food Prices as Dollar is Predicted to Hit Record High

The Budget Options for 2024/2025 and Medium-Term Report have unveiled a concerning projection: the Kenyan shilling is anticipated to weaken against the dollar, despite its recent upturn.

According to the report, the shilling is forecasted to potentially lose up to 21 percent in value by the end of 2024. Consequently, it is expected to trade at approximately Ksh171 against the dollar. :smiley:

“Experts have posited that shilling is likely to continue losing value for the better part of the year and may shed as much as 21 per cent of its value by the close of the year,” reads part of the report.

According to the report, this weakening will result from geopolitical tensions which will trigger capital flights in search of safer investments. Cases of terror attacks in the country may force foreigners out of the country.

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Several shipping containers at the Port of Mombasa

Another reason identified is the ripple effect of the high US interest rates. On these interest rates, the Federal Reserve on February 27 revealed that the decline of the rates will be slow, shattering investors’ hopes.

Additionally, another reason is the rising cost of imports which will see the demand for dollars increase. Some main goods imported include fuel, food (including edible oils), and other raw materials.

The weakening of the shilling is poised to negatively impact the pricing of essential commodities, including food and fuel. This will further burden Kenyans already grappling with the elevated cost of living.

“A weak shilling implies that these goods will be substantially costlier, and this cost will be passed on to the consumer, thereby increasing the cost of living and perpetuating the decline in household consumption,” reads part of the report.

Notably, this increase in the cost of living will see more Kenyans limit their household consumption in 2024. The subdued consumer activity will also be attributed to the decline in incomes.

Kenyans will also be dealing with a higher tax burden in 2024 as the government introduces more taxes such as Social Health Insurance. :upside_down_face:

“Indeed, despite the cooling of inflationary pressures due to stabilized food and fuel costs, the knock-on effects from exchange rate depreciation
could substantially increase input costs and fuel costs, leading to higher production costs,” reads part of the report.

Despite the decline, the government has assured Kenyans of putting in place measures to see to it that the shilling continues to gain against the dollar and other foreign currencies.

“I want to assure Kenyans that we have the resources. We have the money that is coming from the international institutions and the risk of the Eurobond will be eliminated and that should contribute to the strengthening of the shilling,” Central Bank of Kenya Governor Kamau Thugge stated on February 7.

A report by the Parliamentary Budget Office (PBO) on the Budget Options for 2024/2025 and the Medium Term has revealed a worrying trend of foreign investors leaving the country.

Per the report released in February, Kenya risks losing these investors due to the reduced profits from the Nairobi Securities Exchange (NSE).

“The erosion of investor confidence and reduced capital formation stemming from the struggling stock market collectively contribute to a challenging economic landscape for businesses across sectors,” read part of the report.

In 2023, the NSE experienced a decline of 27.5 per cent, also over 6,000 foreign investors left the NSE in nine months.

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This decline is a result of some investors pursuing higher returns and therefore moving to developed economies.


Jomo Kenyatta International Airport (JKIA)

Additionally, another reason for the decline in foreign investors is the increasing interest rate in Kenya and other developing countries. Interest rates were increased by the Central Bank of Kenya from 7 per cent to 12.5 per cent which will also influence investor decisions.

Also, another reason is the review of tax measures and a shortfall in revenue collection. These measures affect consumer behaviour and investor confidence in the country.

Cumulatively, these factors influence the business environment which results in long-term economic stability and growth projections.

According to the report, another reason is Kenya’s debt and the surging borrowing costs which makes long-term bonds more expensive. This has discouraged foreign investors.

“In the current global macroeconomic environment, the decline in international appetite for Kenyan government bonds is pronounced, with investors now demanding a premium to offset the perceived risks,” read part of the report.

In the report, Kenya was urged to adopt more measures to regain investor confidence which will subsequently boost the economic growth of the country.

Meanwhile, in another report, Quarterly Economic and Budgetary Review Report, from the National Treasury it was revealed that investors were moving from Kenya to the US and other nations.

This decline was attributed to global monetary policy tightening forcing investors to look for other safer areas.

In 2023, the Henley Private Wealth Migration Report 2023, 100 millionaires were reported to have left the Kenyan market in 2022 due to increased taxation.

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Kenyan peasants must eat shit

which terror attacks, we have been under attack for 30 years since 1997 na kenya haijaisha bado

Terror attacks- the presence or absence is not of importance here, jerk…it’s the value of your shilling going down that worries us. :smiley:

sasa juu saa hii imeshuka, i expect you have already made a few billion in the conducive low shilling envrionment. Hope you save some for when it rises again

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A multi-billion beauty company that distributes weaves and hair extensions within the country has exited the Kenyan market after selling a portion of its assets to a newly incorporated company.

This was announced by the Competition Authority of Kenya (CAK) on Monday, February 11, in a statement approving the sale.

CAK was involved in the sale due to a legal requirement that mandates the Authority to be involved in transactions where the combined turnover or assets, whichever is higher, is over Ksh1 billion.

With the sale expected to go through, hundreds of Kenyans who were working in the company are now set to be retrenched.


Kenyans queueing for jobs

“The transaction will elicit negative public interest concerns. Specifically, it will lead to the loss of 652 jobs which is equivalent to 30 per cent of the target’s 2,171 employees,” CAK revealed in its statement.

The company until its sale was controlled by a consumer products company registered in India.

To cushion 70 per cent of workers who will now be working in the new company, CAK directed that they should not be subjected to a salary reduction in a period of 12 months.

“The Competition Authority of Kenya has approved the proposed acquisition on condition that at least 70 per cent of the target firm’s employees are retained on employment terms that are no less favourable than their current terms for 12 months following completion of the transaction,” CAK announced.

CAK noted that while the transaction would not negatively impact competition in the hair extensions and wigs market, it would elicit public interest concerns.

There will be no disruption in the market since the sale of hair extensions and wigs is largely fragmented.

According to CAK, in 2022, the company controlled Ksh4 billion of the Ksh80 billion revenue in the wigs and weaves industry.

Considering the company was controlling 5 per cent of the industry, it was noted that its exit would not change the structure and concentration of the market.

CAK argued that the newly incorporated company will be able to take over the 5 per cent share of the market that is being left by the exiting company.

“Additionally, the target will continue to face competition from other players controlling 95 per cent of the market,” CAK explained.

Weave??

Hizo weaves maboy wangu washawai chukua wakapeleka zambia na bus…made some hundreds of thousands in profits but police wakakua na tamaa esp pale tz…ikabidi maboy waache

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https://twitter.com/GithugaWah94207/status/1767793332179059103?t=Jun3Fu0exl32gSd5ghupxg&s=04&fbclid=IwAR3hGyH6nsFcKe5J29XTFuyjMqh_0sMCIZAnC4UctQ71XtNnITM9GEmR6lY

Economists mbona commodity prices hazichange ?..

Kwani hii Dollar inashuka peke yake bila impact buana…Ebu tuelezee.

If the Kenyan government tells you to sell your dollars you should be busy buying them

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https://twitter.com/Kamau266/status/1768251482409709843?t=VsVLkZrdyCmwclvsMf3OdA&s=04&fbclid=IwAR3xAHv00dTCu-shrjmXZGCldC4NDip3pTsRAh1gvKKafLHh9YPx9UXBnEk

Kenyan Shilling Makes Back to Back Drop After Being Ranked Best Performing

The Kenyan Shilling on Wednesday recorded its third consecutive drop this week after slipping on Monday and Tuesday.

As of Wednesday, commercial banks quoted the Shilling at 132/133 against the Dollar, compared to Tuesday’s closing rate of 131/132.

Meanwhile, on Monday, commercial banks quoted the Shilling at 130/131 per Dollar, compared with Friday’s close of 129.50/130.50.

While commenting on the sudden drop, senior economist, Professor Fred Ogola who spoke to Kenyans.co.ke noted the government’s monetary policy to buy back part of the Eurobond using a new Eurobond was not a sustainable move to tame the Shilling’s drop.

Economists mbona commodity prices hazichange ?..

Kwani hii Dollar inashuka peke yake bila impact buana…Ebu tuelezee.

According to Ogola, the economic fundamentals that could have helped sustain the Shilling against the dollar were not changed, and thus the fluctuations in the exchange rates.

“If you issue a bond at an 18 percent interest rate, it means that you are increasing the Kenyan debt stock by a significant amount because you are borrowing with a higher cost of capital,” Professor Ogola stated.

“It is like a change that has happened by a fluke, there are no serious economic fundamentals that have changed and therefore we are likely to see more volatility of the Shilling going forward,” he added.

Another economist attributed the Shilling’s drop to a demand for the dollar from people who were hoping that the Dollar/Shilling exchange rate would go lower.

It was revealed that those mostly rushing for the dollar were traders who held back from buying dollars in recent weeks as the local unit strengthened.

The recent development comes weeks after the local currency was ranked as the best performing globally after it gained by over 20 percent.

Instructively, the Shilling’s sudden gain was attributed to the partial buyback of the 310 billion ($2 billion) Eurobond that was acquired in 2014 and is expected to mature in June this year.

The repayment of the Eurobond was made after the government issued another Eurobond worth Ksh233 billion ($1.5 billion).

Other factors that contributed to the gains were the hike in diaspora remittances and inflows from the sale of Kenyan tea abroad.

Another critical factor that led to the Shilling’s gain was the issuance of the infrastructure bond by the Central Bank of Kenya (CBK).

Sounds like some farfetched panic rumours but let’s wait and see how it pans out.

500 millionaires fall off in Kenya - here’s why

CHINEDU OKAFOR

April 18, 2024

According to a recent report, 2023 saw to the decline in the population of dollar millionaires in Kenya. This was a result of the poor performance of the country’s local currency. The report noted that the weak Shilling shed off the investable wealth in dollars these millionaires would have otherwise had. Additionally, a seemingly unfriendly business ecosystem prevented the increase in the number of Kenyan millionaires.

500 millionaires fall off in Kenya - here’s why
500 millionaires fall off in Kenya - here’s why

A report seen in the Kenyan business news publication, BusinessDaily showed that around 500 Kenyans fell below their millionaire status last year.

The Africa Wealth report, by Henley and Partners, showed that Kenya’s 7,700 millionaires in Kenya as of 2022, dropped to 7,200 in 2023. This follows a recent trend in the country, as it relates to the decline of wealthy people in the country.

The number of millionaires in the East African country was at an all-time high in 2021, after the country began to rebound from the effects of the COVID-19 pandemic the year prior.

According to experts, aside from the Shilling depreciation, a slightly more hostile business environment made it more difficult for more millionaires to emerge last year.

The Shilling dropped from 123.38 against the US dollar at the start of the year, to 157.29 at the end of 2023. However, 2024 has seen the resurgence of the currency’s strength, as the Kenyan Shilling went from one of the worst-performing currencies in Sub-saharan Africa to one of the best-performing.

Additionally, the country’s inflation rate which hit an all-time high of 9.2 last year now stands at 5.7% having declined to 6.9% when the year began. This year has also seen Kenya go from having the world’s worst-performing stock market to the best-performing, denoting a recovery in its overarching economy.

With the Shilling’s increased volatility, several Kenyan banks raised lending rates beginning April 2024.

The banks cited the ongoing changes in the microeconomic environment as the reason to raise the rates.

Macroeconomic activity is largely defined by market trends especially inflation which is influenced by the performance of local currency.

Other factors that can inform the macro environment include; consumer spending as well as monetary and fiscal policies.

Bundles of 100 dollar bills

The Shilling between the months of February and March appreciated against the world’s major denominations to become the best-performing currency globally.

In April, the Shilling became volatile and is now exchanging at 131 units against the Dollar according to the Central Bank of Kenya (CBK).

While there are fears that the Shilling could slide to the record 160 units against the greenbuck experienced in February and March, the local currency has been trading between 130 and 133 against the Dollar for the month of April.

Despite the fears by local banks, CBK on April 3, retained the Central Bank Rate (CBR) at 13 per cent for April and May 2024 following its Monetary Policy Committee (MPC) meeting.

“The MPC noted that overall inflation is expected to continue declining in the near term, supported by lower food and fuel prices, and pass-through effects of the recent exchange rate appreciation,” CBK banked on the strength of the Shilling while maintaining the CBR.

One of the Kenyan top banks revealed that it would increase its lending rate from 16.5 per cent per annum to 17.5 per cent per annum.

Additionally, the United States Dollar lending rate was increased from 11 per cent to 11.75 per cent per annum.

The raising of the lending rates will not affect fixed-rate loans but clients with variable-rate loans will be impacted.

Hoarding of Dollars Among Factors Causing Fluctuating Exchange Rate - Ndindi Nyoro

National Assembly Budget Committee chairperson Ndindi Nyoro explained the recent fluctuations witnessed in the exchange rate.

According to the Kiharu MP, who was speaking in Kwale County on Thursday, April 26, the recent fluctuations were mostly influenced by local factors rather than external factors.

In particular, he detailed that there were instances of dollar hoarding as those with foreign currency waiting for a more favourable exchange rate of their liking.

A higher exchange rate translates to more money if they are changed to the local currency.


Ndindi Nyoro

However, he opined that there would be no drastic movements in the exchange rate owing to the monetary policies that have been adopted by the government.

"We have seen stability in the exchange rate market. This has been driven by the monetary policy that Kenya has adopted. We believe that the stability will continue to persist.

“The oscillations in the exchange rate market are driven by local sentiments such as the hoarding of the dollar. The fluctuations we have seen in recent days are driven by sentiments,” he stated.

For the last week, the dollar has been exchanged between Ksh130 and Ksh134.

As of April 26, the dollar was trading at Ksh133.1.

Notably, financial experts had projected that the shilling would weaken after making major gains against the dollar. This was attributed to the increasing demand for imports.

“Respondents expect that the resumption of the normal importation cycle and increased demand for dividend repatriation could keep the exchange rate slightly under pressure,” read the April Market Perceptions Survey by the Central Bank of Kenya (CBK).

On the other hand, the recent gains of the shilling have been attributed to Kenya’s activities in the Eurobond and the increased inflows of the dollar through diaspora remittance among others.

The World Bank also named the shilling as the best-performing currency in the sub-Sahara in 2024.

The Kenyan shilling on Friday, May 3, made a comeback to strengthen against the United States dollar after several days of weakening.

Traders cited the gain by the local currency to an increase in remittance inflows by Kenyans living in the diaspora.

Another reason for the stability of the shilling on Friday was the surge in inflows from exports, particularly on tea which attracted a higher return on the international markets.

According to the forex traders, increased transactions by non-governmental organizations also played a crucial role in the stability of the local currency against the dollar.

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The increase in dollar inflow by the non-governmental sector matched the demand for the dollar by the manufacturing sector thus resulting in the stability of the shilling.

As of Friday, the shilling traded at Ksh134.50/135.50 per US dollar, according to the foreign exchange experts, this was the same level it closed on Thursday, May 2.

For the past three weeks, the shilling weakened against the greenback due to a higher demand for the dollar by manufacturers.

The fuel and manufacturing sector demanded more dollars to purchase raw materials for their industries and thus needed foreign currency to complete their transactions on the international front.

The local currency has been on the decline since mid-March, giving back some of 2024’s gains because of the strong return of manufacturing-sector foreign-currency demand.

However, despite the three-week decline, the shilling was marked as the best-performing currency globally, currently at a 16 per cent improvement, a slight drop f from its 20 per cent improvement in early March.

In February this year, the shilling kicked off its gains as it strengthened against major currencies globally including the dollar.

The gains were attributed to the government’s decision to buy back part of its Ksh 31 billion ($2 billion), 2014 Eurobond which matures in June this year.

The repayment was made by another new Eurobond worth Ksh233 billion ($1.5 billion) issued by the government in February, the Treasury announced.

After three months of erratic depreciation and appreciation of the Kenyan currency that caught global attention, the Shilling has found consistency for two weeks.

According to data from the Central Bank of Kenya, for close to 14 days, the Shilling has traded at 133 against the United States Dollar (USD).

On Tuesday, May 7, CBK revealed that the Shilling’s exchange rate against the Dollar was 133.0434.

The figure was tabulated from the commercial bank’s average exchange rates at market close on Monday.

Commercial banks quoted the shilling at 133/134 on the morning of Tuesday further signifying the local currency’s consistency.

Traders remarking on the Shilling’s stability attributed that to the inflows of hard currency from Kenyans working abroad.

Diaspora remittances have in recent times become one of Kenya’s top foreign exchange earners bringing approximately Ksh671 billion annually.

Additionally, the Shilling has continued to exhibit stability against the Dollar due to money raised through agricultural exports.

“We’re not seeing a lot in terms of the demand side, they’re waiting for the (dollar exchange rate) to go lower," a trader was quoted by Reuters commenting on the Shilling stability.

Diaspora remittances have been a key focus point for President William Ruto’s administration having been pinpointed as a long-term plan to stabilise the Shilling.

On April 27, President Ruto remarked that he was laying the groundwork to ensure diaspora remittances more than doubled in less than a decade.

“It is my intention that in the next five to seven years we should increase our diaspora remittances from USD4 billion to USD10 billion dollars,” he remarked.

“It will go a long way in ensuring that more Kenyans have the income that supports our economy.”