In an unexpected development, the Kenyan shilling has shown notable strength against the US dollar and other major global currencies, emerging as one of the top-performing currencies worldwide in March 2024. This surge has been pivotal in alleviating Kenya’s external debt load, according to a report by the Controller of Budget (CoB).
The latest CoB report underscores how the impressive performance of the Kenyan shilling has helped address the country’s escalating external debt, largely denominated in US dollars. As of March 31, 2024, Kenya’s total public debt stood at KSh 10.36 trillion, with KSh 5.16 trillion (49.6%) being external and KSh 5.2 trillion (50.4%) domestic.
![Central Bank of Kenya (CBK) governor Kamau Thugge](https://1stafrika.com/wp-content/uploads/2024/06/CBK.jpg)
Controller of Budget Margaret Nyakang’o pointed out that the shilling’s appreciation significantly contributed to the reduction in external debt.
The Kenyan shilling gained 24.66 points against the US dollar during this period, surpassing several major currencies, including the British Pound. This led to a 15% reduction in Kenya’s external debt portfolio. Nyakang’o emphasized that changes in foreign exchange rates have a substantial impact on the cost of servicing external debt.
Market analyst Rufas Kamau from FXPesa shared insights on the potential for the shilling’s continued strength. In an interview with TUKO.co.ke, Kamau mentioned that increased foreign funding could further strengthen the shilling, referencing President William Ruto’s recent state visit to the US, where Kenya secured substantial funding agreements.
Kamau predicted.
As of May 30, 2024, official CBK rates showed the shilling trading at KSh 131.87 against the US dollar. Continued inflows of foreign funds are expected to sustain or enhance this strength.
Despite the beneficial impact of a stronger shilling on external debt, Kenya’s overall debt servicing costs remain high. The National Treasury reported that the government spent KSh 1.24 trillion on debt repayment, primarily due to the maturation of internal and external loans, with the full-year debt servicing amount projected to reach KSh 1.86 trillion.
The CoB report detailed a revised public debt allocation of KSh 1.87 trillion for the same period, including KSh 918.84 billion for interest payments and KSh 947.2 billion for redemptions (principal payments). Of this, KSh 839.14 billion was set aside for servicing external debt, comprising KSh 566.66 billion for redemptions and KSh 272.48 billion for interest payments.