Kenya’s stock of external debt of $38.51 billion as at the end of January, which translated to Sh6.1 trillion in local currency terms, is now valued at Sh5.3 trillion, holding the accumulation of additional foreign debt constant. Foreign investors normally exchange their dollars for shillings when entering the local market, and buy back dollars for repatriation upon selling their shares. An appreciating shilling therefore gives them an exchange gain; given that they get more dollars for every shilling when exiting compared to when they came in. Local traders have taken the opportunity presented by the stronger local currency to stockpile on imports, there being no assurances on the sustainability of the recent rally. In addition, we believe that local dollar holders continue to divest to mitigate potential losses in anticipation of further strengthening,” noted Standard Investment Bank Senior Research Associate Stellar Swakei.
