By Judy Maina
NAIROBI—In a remarkable turn of events, the Kenya Shilling has maintained its position as the best-performing currency in the region over the first seven months of 2024, boasting a year-to-date gain of 16.95 percent.
This development stands in stark contrast to the widespread weakening of African currencies against the US Dollar, which has driven several governments to recalibrate or relaunch their currencies to manage the financial pressures.
The bullish trend of the shilling against the greenback since February can be attributed to the settlement of sovereign maturities and an influx of Foreign Direct Investments (FDIs), spurred by attractive yields on government securities.
Despite this strong performance, the Central Bank of Kenya remains vigilant, acknowledging the currency’s susceptibility to global shocks and market sentiment shifts, and is prepared to mitigate potential extended risks.
A robust currency plays a pivotal role in attracting foreign investments and reducing the cost of imports, presenting significant advantages to the country’s economy.
Conversely, Nigeria’s Naira has seen the most significant decline, with a year-to-date loss of 80.63 percent.
This sharp depreciation follows a second currency devaluation by the Central Bank of Nigeria in 2024, new foreign exchange regulations, heightened inflationary pressures, and tight foreign currency liquidity.
The Egyptian Pound has also experienced substantial weakening, ranking second in the region with a more than 38 percent decline after a deliberate devaluation by the Central Bank of Egypt in March.
The apex bank’s decision to raise interest rates to an unprecedented 27.35 percent follows the International Monetary Fund’s (IMF) advice for a tighter monetary policy to combat escalating inflation and foreign exchange shortages.
Consequently, the IMF has postponed two reviews of Egypt’s current loan, pending fulfillment of specific conditions.
Ethiopia’s Birr was floated last week, resulting in an immediate 30 percent loss in value and raising concerns about potential inflation spikes.
This move towards currency liberalization followed extensive discussions with the IMF and the World Bank, after Ethiopia defaulted on a US$33 million Eurobond obligation in 2023, necessitating external financial support.
Meanwhile, the Ghanaian Cedi continues its downward trajectory, depreciating by 31.4 percent against the dollar during the first seven months of 2024 due to a foreign currency shortage.
As African economies navigate these turbulent waters, the performance of the Kenya Shilling offers a glimmer of stability and growth, highlighting the varying impacts of economic policies and global market dynamics across the continent.
The writer of this story can be reached at: judy.maina@alleastafrica.com
