The shilling has remained stable at about 129 against the US dollar for nearly nine months, underlining the central bank’s extended bid to keep the local currency at that level.
The shilling was quoted at an average of 129.26 against the dollar on Monday, according to the official Central Bank of Kenya (CBK) rates, marking little change since August 17, 2024 when it exchanged for 128.91.
Earlier this year, Treasury Principal Secretary Chris Kiptoo said that the CBK had been intervening in the market to maintain the currency’s stability, without which the currency would have appreciated to the 120 versus the dollar.
The local unit has, however, been more volatile against other global currencies including the euro, which has appreciated significantly since February, when the US embarked on its chaotic tariffs imposition on trading partners.
Over the nine-month period, the euro has traded within a range of Sh132.25 to Sh149.72, while the British pound has traded at a range of Sh157.23 and Sh174.08. These currencies have tended to be more responsive to changing geopolitical and economic shocks.
In the wake of the emerging tariff-led trade wars, the euro has been one of the currencies investors have flocked to as the dollar marked a rare decline.
Most trade transactions and international borrowing are denominated in dollars.
The stability of the shilling against the American currency benefits certain sectors of the economy.
Importers, for instance, are enjoying lower, more predictable costs than in early 2024, when the shilling had depreciated to hit a low of Sh163.
Those with foreign currency loans, including the government and firms like Kenya Power and KenGen, are also enjoying lower debt service costs as they need fewer shillings to repay the credit facilities.
The government owes hundreds of billions of shillings to foreign governments, multilateral agencies and bondholders, most of which is repaid in dollars.
On the other hand, exporters who had made significant profits at the peak of the shilling’s depreciation, have recorded lower receipts from the sale of their goods on external markets.
Those saving in dollars have also seen the value of their cash holdings fall in shilling terms.
According to the latest depository data from the CBK, the shilling value of dollar deposits in commercial banks declined to a 17-month low of Sh1.25 trillion in December 2024, down from an all-time high of Sh1.6 trillion in January 2024.
For some exporters such as cigarette maker BAT Kenya and Carbacid Investments Plc, the appreciation of the shilling has also been significant enough to hurt their profitability.
BAT’s net profit for the year ended December 2024 fell by 19.4 percent to Sh4.4 billion as the stronger shilling depressed sales growth, even as its operating costs continued to rise. The company’s net sales in the period grew only marginally to Sh25.72 billion from Sh25.56 billion the previous year.
Carbon dioxide producer Carbacid’s net profit for the full year to December 2024 fell by 10.3 percent to Sh434.9 million as the stronger shilling eroded the value of sales, which declined by 12.9 percent to Sh940.6 million.
