Faith Nyasuguta
The Kenyan shilling has emerged as the top-performing currency in Sub-Saharan Africa, according to the latest report from the World Bank. This increase in value is directly attributed to the Central Bank of Kenya’s (CBK) decision to raise the base lending rate.
The report also forecasts a 5% growth for Kenya’s economy in 2024. It anticipates that this growth will be driven by increased investment, fueled by restored access to international capital markets, which will bolster investor confidence and attract capital inflows.
“The Kenyan shilling is the best-performing currency in the subcontinent, appreciating by 16% so far this year. Although the Zambian kwacha initially strengthened by 14% by mid-February, it has seen a slight decline, recording a year-to-date appreciation of 2.4% as of mid-March.”
“Both countries’ central banks raised interest rates to support their currencies. In Kenya, securing funds for repaying its Eurobond maturing in June 2024 restored confidence and boosted demand for the local currency,” stated the World Bank.
During the Monetary Policy Committee (MPC) meeting last month, the Central Bank of Kenya (CBK) announced its decision to maintain the base lending rate at 13%. The MPC cited the appreciating value of the Kenyan shilling among other factors contributing to this decision.
Since the April MPC meeting, Kenya’s stock market has experienced a notable improvement, transitioning from the worst to the best. Experts suggest that investors are increasingly favoring Kenyan shilling-denominated investments due to the higher base lending rate, which translates to increased interest earnings.
The World Bank report also highlights that inflation is subsiding across most Sub-Saharan African economies but remains elevated. While inflation is expected to decrease in approximately 80% of African countries compared to 2023, it remains higher than pre-pandemic levels in 32 out of 37 countries.
Median inflation in the region is projected to decline from 7.1% in 2023 to 5.1% in 2024 and further to 5% in 2025-26. Factors contributing to this lower inflation rate include the normalization of global supply chains, a gradual decline in commodity prices, and the effects of monetary tightening and fiscal consolidation.
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