IMF Questions Unusual Stability of the Kenyan Shilling
The International Monetary Fund (IMF) has expressed concerns over the Kenyan shilling’s prolonged period of stability, noting that its value has remained virtually unchanged at approximately 129 to the US dollar for nearly a year. This stability is seen as unusual by the IMF, given the significant shifts occurring in other global currencies.
The concern stems from the fact that the shilling has not strengthened despite Kenya experiencing strong foreign inflows from sources such as remittances, tourism, and bond sales, which typically would cause a currency to appreciate.
In response, Kenyan Central Bank Governor Kamau Thugge has defended the shilling’s stability, characterizing it as a market-driven outcome. He points to improved export performance, government fiscal measures, and lower demand for US dollars as key factors behind the steady exchange rate. Governor Thugge has also dismissed the IMF’s worries, denying that the central bank has been actively intervening in the market to maintain the shilling’s current level.
This public disagreement has become a point of contention, reportedly delaying critical negotiations for a new IMF lending program. The outcome is significant for Kenya as it continues to manage its public debt, which stands at 68% of its Gross Domestic Product (GDP).
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