Kenya Shilling Outperforms All World Currencies, Night Raids in UDA Wars

Hello and welcome to the Evening Brief Newsletter where we are covering the shilling in its full glory.

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Stronger by the Month

Central Bank of Kenya Governor Kamau Thugge confirmed that the Kenyan Shilling has continued to grow stronger against the dollar compared to other currencies, performing  ‘better than virtually all the other currencies’ in 2024.

Specifically, the Governor noted that the Shilling appreciated by 17 per cent against the dollar as of June 4 this year.

The performance was impressive ahead of all other regional currencies. The second-best performance was posted by the Botswana Pula.

What Thugge is Saying: “The Kenyan shilling has performed better than virtually all the other currencies. It has appreciated against the US Dollar by about 17 per cent. When we move closer at home and look at the performance of other currencies in the region, still, we have a very strong performance followed by Botswana’s Pula.”

Benefits of a stronger Shilling: Thugge revealed that the country was enjoying increased inflows of foreign exchange as a result of the strengthened shilling.

“The Shilling has strengthened in 2024 and this reflects increased inflows of foreign exchange, the impact of the monetary policy measures, the impact of recent reforms in the foreign exchange market, and the buyback of the June 2024 Eurobond,” he added.

In comparison, the Egyptian Pound, as well as the Nigeria Naira, recorded the deepest depreciation against the Dollar regionally.

Prediction: Speaking during the post-June 2024 Monetary Policy Committee (MPC) press conference, Thugge projected the Shilling exchange rate will remain steady, dismissing any further appreciation or weakening.

He clarified that Shilling’s performance was majorly market-determined and that the Central Bank would intervene only when necessary.

“We don’t see significant weakening or significant strengthening, there should now be stability in the exchange rates. We will intervene when there is a need to, if there is excessive volatility on either side, but we will let the market determine that and we will see how the current, capital and financial accounts perform,” he explained.

Exchange Reserves: Thugge further noted that the exchange reserves were stronger at 3.63 months of import cover exceeding the 3-month mark recommendation by the International Monetary Fund (IMF).

“As of June 4, the CBK usable foreign exchange reserves were at 6.979 billion Dollars which is equivalent to 3.63 months of import cover and we consider this amount to be adequate to meet any short-term shocks or any emergencies not foreseen,” he explained.

“Having a flexible exchange rate system also translates to 3.63 months of import cover well over the 3 months of import cover that is normally suggested by the IMF.”

Catch Up Quick: CBK, through its weekly bulletin on Monday, showed that the shilling had posted a stable performance against the dollar trading at Ksh131.87 against the dollar on May 30, a slight depreciation from Ksh131.36 as of May 23.

“Inflation has remained sticky in advanced countries, with headline inflation in Germany rising to 2.4 per cent in May 2024 from 2.2 per cent in April while France’s inflation remained unchanged at 2.2 per cent. The US dollar index weakened by 0.4 per cent against a basket of major currencies during the week ending May 30,” read the notice in part at the time.

UDA Battle Descends

As fallout in the ruling United Democratic Alliance (UDA) party continued, Former Nairobi nominated Senator Millicent Omanga blamed a night raid of her business on Governor Johnson Sakaja, who was seeking the UDA Nairobi Chairperson position.

The former Senator shared two video clips after recording a bus she alleged ferried county officials to her business to arrest her.

She linked the night raid directly to her decision not to support Sakaja for the county chairmanship position.

What Omanga is Saying: “Governor Johnson Sakaja has sent a bus load of over forty county askaris to my business premises to arrest me and my staff simply because I’m not supporting him for the Nairobi County UDA chairperson.”

“Sakaja has sent a whole whole bus of 56 people just to come and arrest me.”

Background: Governor Sakaja announced his bid to vie for Nairobi UDA chairmanship a few months and a preliminary election was conducted on Friday, May 31, in several constituencies.

The elections were not as peaceful as expected since Sakaja’s supporters clashed with Embakasi North MP James Gakuya’s supporters.

Statistically, however, the elections placed Sakaja in the lead for the position ahead of Gakuya who is aiming to occupy the same position.

National Fallout: The raids came as wrangles within the party consumed the unity between President William Ruto and his deputy Rigathi Gachagua who appear to be at loggerheads.

For weeks, rumours had swirled in the press that the two leaders were no longer on the same page indicating that Gachagua had taken time off and went on a prayer and fasting session on Mt Kenya to clear his path.

After tussling over the necessity of MPs travelling countrywide beyond their constituencies, Gachagua opposed and Ruto approving, the fallout escalated to include Farouk Kibet, President William Ruto’s aide, and other politicians.

On Wednesday, Kibet argued that the unity of a country was more important than one individual. Lari MP Joseph Kahang’ara on the other hand emphasised that President Ruto ascended to power on his own and did not need anyone to win over the Mt Kenya vote bloc.

Gachagua, however, defended himself noting that he always seeks grassroots approval before making any decision.

“Align your thinking and utterances with the ground. That is what I do all the time. I’ve never gotten it wrong in my political life. Any time a decision has to be made I go to the grassroots, listen to the ground, and align with my bosses, the people. These are the people you must please,” he stated.

Catch Up: Read our full coverage of the fallout in our Monday, June 3, edition of this Newsletter.

DATA POINT – High Taxes Concerns

On Thursday, Infotrak released a survey showing a significant drop in Kenyans concerned with the cost of living, most of whom shifted to lament over introduced taxes by the Finance Bill 2024

By The Numbers: Statistics of respondents who highlighted the cost of living as a concern dropped from 72 per cent in February 2023 to 65 per cent in September 2023 and now, May 2024, stands at 49 per cent.

In terms of why the country heading in the wrong direction, the cost of living accounted for 45 per cent followed by high taxes imposed at 27 per cent, poor governance at 7 per cent and unemployment at 6 per cent.

Of Note: 63% of Kenyans still believe that the country is headed in the wrong direction while only 19 per cent said it is in the right direction. In previous polls in February 2023 and September 2023, 62% and 53% respectively answered the country was headed in the wrong direction.

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This newsletter was written by Derrick Kubasu and edited by Brian Muuo.

Washington Mito contributed to the content.

Graphics prepared by Adongo Kyalo.