With the current appreciation of the Kenyan shilling against the US dollar, we can assert that currency significantly impacts business and finance. Just a few days ago, 1 US dollar was equivalent to approximately 160 Kenyan shillings, indicating a slow depreciation of the Kenyan currency that affected our economy.
However, for some Kenyan citizens, the appreciation of the Kenyan shilling comes as a shock. Many citizens holding their assets in dollars are compelled to exchange their currencies into shillings as the latter is expected to appreciate, resulting in less money.
This shift occurred after Deputy President Rigathi Gachagua advised Kenyans hoarding dollars to sell them, stating that the shilling would continue to gain value against the dollar. “Hii dollar muuze leo na kesho na kesho kutwa.Msipouza mtaenda hasara kubwa". he stated at a function in Murang'a and true to his words, on Tuesday, February 13th, the Central Bank of Kenya reported the local unit at 156.70, dropping to 153.20 on Wednesday, February 14th, and continuing to appreciate.
Both the depreciation and appreciation of the Kenyan shilling against the US dollar have effects on the country’s economy, particularly on businesses and finance. Currency depreciation has its disadvantages, including increased cost of living due to higher prices of imported goods and services, thereby reducing individuals' purchasing power and disposable income, consequently undermining businesses and finance.
Moreover, depreciation reduces foreign investment attractiveness, leading to a slowdown in economic growth. It also increases government debt burden, possibly necessitating the implementation of various taxes by the government, as proposed by President William Ruto, to generate revenue for debt repayment.
However, currency depreciation can benefit businesses by making exports more competitive in the global market while making imports more expensive, thereby reducing demand for foreign products. Conversely, currency appreciation, as observed with the Kenyan shilling, increases export costs, potentially decreasing the country's gross domestic product and causing trade deficits due to high import levels. Additionally, currency appreciation lowers inflation by reducing demand for imports when the native currency strengthens.
Many citizens find the appreciation of the Kenyan shilling surprising, especially those who earn online in dollars and expect higher returns after conversion. It is essential to educate citizens on the advantages of currency appreciation and its impacts to foster understanding. However, many citizens remain unaware of these dynamics, leading to misconceptions about the value of their currency and financial decisions.
The sudden appreciation of the Kenyan shilling can be attributed to Kenya's purchase of a portion of its 313 billion Kenyan shilling Eurobonds, settling investor nerves and attracting foreign currency inflows. However, this reason may not be widely known among citizens.
Recent research by Capital Business indicates that Equity Bank is buying one dollar at 135.8 shillings and selling it at 140.8 shillings, while Stanbic Bank is buying and selling a similar amount at 135 and 145 shillings, respectively.
Major local forex bureaus in Nairobi also report improvements in the local unit against the USD.
For instance, Satellite Forex Bureau is buying one USD at 135 shillings and selling it at 147 shillings, while Sky Forex Bureau quotes the same amounts at 120 shillings (buying) and 148 shillings (selling).
Unfortunately, much of this information remains unknown to the public. Therefore, we urge the government to introduce education on taxation, currency, expenditure, and related matters to enhance citizens' understanding.
The Writer Grace Anyona. M is a Second Year Communication Studies student at Chuka University.
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