Kenya’s economic landscape is experiencing a significant boost as the Kenyan shilling clinches the title of the best-performing currency in Sub-Saharan Africa, according to the latest report from the World Bank.
This achievement reflects the Central Bank of Kenya’s (CBK) strategic decision to raise the base lending rate, which has fortified the shilling’s value and enhanced investor confidence.
The World Bank’s report projects an optimistic economic growth of 5% for Kenya in 2024, spurred by increased investment facilitated by the country’s regained access to international capital markets. This positive outlook is expected to fuel a surge in capital inflows, strengthening Kenya’s position as a key player in the region’s economy.
The CBK’s recent Monetary Policy Committee (MPC) meeting resulted in the decision to maintain the base lending rate at 13%, attributing it to the shilling’s appreciation and ongoing efforts to sustain economic momentum. This strategic move has cemented Kenya’s reputation as a stable investment destination and contributed to the shilling’s strong performance.
In the region, both Kenya and Zambia have experienced currency appreciation following interest rate hikes aimed at defending their currencies. Kenya’s successful Eurobond repayment, scheduled for June 2024, has instilled confidence in the local currency and heightened demand.
Meanwhile, Kenya’s stock market has seen a remarkable transformation, shifting from the worst to the best performer since the April MPC meeting. This shift can be attributed to the appeal of Kenyan shilling-denominated investments, offering attractive interest rates due to the high base lending rate.
Despite concerns over inflation across Sub-Saharan Africa, the World Bank report points to a cooling trend in most economies, though still higher than pre-pandemic levels. Factors such as the normalization of global supply chains, declining commodity prices, and the impact of monetary tightening and fiscal consolidation initiatives are moderating inflation.
As Kenya continues its journey toward economic growth and stability, its strong currency and prudent monetary policies lay a solid foundation for sustained success and increased global recognition.
