Ksh to continue weakening against US dollar, EFG Hermes Research
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Kenyan Shilling (Ksh) to continue weakening against US dollar due to hoarding according to EFG Hermes Research
Kenyan Shilling (Ksh) to continue weakening against US dollar due to hoarding according to EFG Hermes Research.
On Friday, July 17, EFG Hermes Research predicted that the Kenyan Shilling would continue to fall against the dollar, reaching Ksh150 by December 2023.
EFG Hermes noted that the currency was mostly dropping because Kenyans were hoarding dollars in what represents difficult times for the nation still recovering from global economic shocks.
According to the research, a lack of dollar supply in the market caused the Kenyan shilling to depreciate by 15% in 2023 to Ksh141.44 in Nairobi.
The director of border banks at EFG Hermes Research, Ronak Rasiklal Gadhia, observed that the Central Bank of Kenya had attempted to support the shilling by boosting rates, but it had not totally succeeded as expected.
“We have not seen that dollarisation reverse because there is still some uncertainty as to whether the shilling has stabilised,” Gadhia stated noting that some depositors were still not letting go of their forex holdings.
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EFG Hermes Research showed that despite the dollar shortage, it was imperative that Kenya pays a Ksh283 billion Eurobond that will be maturing in June 2024.
“It is absolutely critical they pay it up because that would send a strong signal that Kenya’s dollar situation is not as bad as it was perceived to be earlier this year,” Gadhia noted adding that a default would raise borrowing costs, resulting in losses for local-currency investment portfolios.
“Significant inflows of foreign currency from a syndicated loan, funding from the World Bank and the International Monetary Fund, as well as a potential new Eurobond issuance will raise enough cash for Kenya to make the payment,” Gadhia noted how the economic crisis will be averted.
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