The Kenyan shilling has gained up to 30 percent of its value against regional currencies, reversing a trend that was witnessed last year, and giving additional money to exporters selling their goods to the East African Community (EAC) countries.
The local currency has in the past six months gained 29.9 percent of its value against Tanzania shilling while its value against Rwandese franc and Uganda shilling has also increased by 27.7 percent and 19.5 percent respectively.
Central Bank of Kenya (CBK) data showed one Kenyan shilling was averaging Ush28.79, Tsh20.66 and Rwf10.22 at the start of trading on Tuesday. The continued gain of the shilling against the regional local currencies means Kenyan exporters are now earning more for the same quantity of goods they were selling to countries such as Uganda –its largest export market— at the start of the year.
Churchill Ogutu, an economist at IC Asset Managers (Mauritius) said strengthening the local unit is likely to have a negative impact on exports to those EAC markets while giving higher gains to EAC investors such as those in Uganda who have invested in Kenyan stocks and bonds at the Nairobi Securities Exchange (NSE).
“From a trade perspective, the strengthening of the shilling against peer currencies in the region may reduce the appeal of Kenyan export products to other EAC countries. On the other hand, it is beneficial to EAC investors who have invested locally who will enjoy a double boom, both on currency valuation gains and the price appreciations that have been seen on the NSE,” said Mr Ogutu.
Against the US dollar, the Kenyan shilling is valued about 18.1 percent higher than at the start of the year and 17.4 percent higher against the Pound Sterling over the same period, aided by the settling of the Eurobond that matured last month.
Attractive interest rates on government securities –to highs of 18 percent— also helped the local currency to gain ground by attracting foreign currency inflows.
The shilling’s gain has erased the advantages EAC importers of goods from Kenya had enjoyed last year when the Uganda shilling, Tanzania shilling and Rwandese franc saw their value against the local unit appreciate by 19.7 percent, 15 percent and seven percent respectively.
The continued strengthening of the Kenyan shilling against regional currencies means Kenyan exporters to the EAC market are recording less revenue on the same quantity of goods than they used to at the start of the year.
Official data shows Uganda was Kenya’s primary export destination in the first quarter ended March at Sh29.67 billion, followed by Tanzania (Sh13.4 billion) and Rwanda (Sh8.54 billion).
Kenya’s exports to its EAC counterparts —Uganda, Tanzania, Rwanda, South Sudan and DRC Congo—crossed Sh300 billion mark to close last year at Sh305.87 billion from Sh226.48 billion a year earlier on increased exports and the admission of DRC into the trading bloc.
