Happy New Year! Welcome to our first Money Weekly Roundup of 2024 ✨ .

This week, the stability of the Kenyan currency came into focus after it emerged that the Shilling continued to slide at an accelerated rate against the US Dollar despite a surprise rate hike by the CBK towards the end of 2023.

With projections pointing to a further weakening of the Shilling, and the Kenya Kwanza administration already raising the borrowing target as KRA misses revenue targets, you may want to be even more intentional with where you invest your money in 2024.

As always, we’ve included some of our favorite finance tips to help you get financially started this new year in our finance tips section below.

Let’s dive in!

What happened this week

💸 Shilling Depreciating Faster in 2024

Despite the Central Bank of Kenya (CBK) raising interest rates last month, the Kenya Shilling continues to depreciate. The Shilling ended 2023 on a depreciating trend. This trend continues into 2024, albeit at an even faster rate putting to question the effectiveness of monetary policy tightening.

• 4-year free fall: Shilling weakened by 58% against the US Dollar since early 2020, with a 35-unit loss in 2023.

• GBP/KES crosses Ksh200 mark: In just one year, the Shilling has lost over 25% of its value against the Sterling Pound to exchange at Ksh202 as compared to Ksh150 in January 2022.

• CBK's unexpected rate hike: CBK surprised the market by raising interest rates by 200 basis points to 12.5% from 10.5% last month. The timing of the rate hike is criticised for coming late in the currency's depreciation cycle.

• Accelerated Depreciation: Shilling's depreciation against the US dollar has increased to 0.16% per day post-interest rate hike, compared to 0.069% before. On December 5, 2023, when the big hike was announced, the Shilling was exchanging at Ksh153.28 to the dollar as compared to Ksh158.3 on January 5, 2024.

• Another Rate Hike: Faster depreciation raises the possibility of another interest rate hike in the upcoming MPC meeting in February.

• Impact on Public Debt: Weak shilling cost taxpayers an extra Ksh65 billion monthly in 2023. Parliamentary Budget Office (PBO) report reveals a Ksh809 billion increase in public debt due to shilling depreciation.

• SGR Loan: payments to China increased by Ksh14 billion due to a weaker shilling.

• Economic Concerns: Increased import costs, impacting consumer prices, forex reserves, and worsening external debt.

• Winners: Significant gains for expatriates, Kenyans with foreign currency salaries, exporters, tourist industry and diaspora remittance recipients.

• Losers: Importers, individuals paying overseas fees, and hard currency borrowers face forex losses. Read More.

Comparison with Other Currencies: After shedding 20.9% against the Dollar  in 2023, Bloomberg ranks the Shilling seventh among the worst-performing currencies in Africa. The Nigerian naira experienced the steepest decline (55%), Malawian kwacha (39.1%), Zambian kwacha (29.5%) Burundian Franc (27.6%) and Congolese Franc (24%). Read More.

🌐🔖 Kenya’s “Visa-free” Puzzle

The new Electronic Travel Authorization (ETA) introduced by Kenya to replace visa requirements has faced criticism from foreign travellers who find it tedious, complex, and costly. President Ruto pledged to simplify travel procedures and eliminate visa requirements during the Jamhuri Day celebration last year effective January 1, 2024. 

• Social media outcry: Foreigners have been expressing frustrations on social media, citing issues with immigration services and unexpected fees. Concerns raised about the negative impression on tourists who were promised a "free visa."

• Cumbersome ETA process: Application to be submitted at least three days before travel, with early submission possible up to three months in advance. Read More.

• Required documents: include a valid passport, a selfie or passport-type photo, contact information, itinerary details, accommodation booking confirmation, and payment details.

• Govt’s Defence: Immigration PS Julius Bitok states ETA is less costly, quick, and provides real-time information. He claims ETA ensures equal treatment and reduced fees for all visitors outside East Africa.

• Tourism Revenue and Future Goals: Kenya earned $1.8 billion from tourism revenue in 2023. With the ETA implementation, the country aims to attract over 5 million tourists annually and earn $9.5 billion from tourism revenue. Read More.

💪 Bonds, Treasury Bills Offering Record High Returns

As the new year begins, government bonds and Treasury bills in Kenya are gaining momentum. The dual-tranche January 2024 Treasury bond sale yielded significantly high rates of 18.39% (3-year bond) and 18.77% (5-year bond), influenced by the recent base rate hike and an increased domestic borrowing target by the Central Bank of Kenya.

Short-term Treasury bills are also projected to maintain interest rates exceeding 16%, driven by investor concerns about debt refinancing risks and expectations of higher interest rates. Rising interest rates are attributed to perceived risks in government borrowing, high inflation, and a weakening Kenyan shilling. Read More.

🧾 KRA Exempts Small Businesses from Mandatory eTIMS Invoicing

The Kenya Revenue Authority (KRA) has exempted farmers and small businesses with an annual turnover below Ksh5 million from the requirement for electronic tax invoices under the new eTims regulations. KRA is now developing a monitoring system, yet to be approved, for small businesses, emphasising transactions over electronic invoicing. 

From this month, all businesses must produce electronic tax invoices to claim expenses during Income Tax filing. The National Treasury plans a 5% withholding tax on farm produce sales to cooperative societies, aiming to expand the tax base.

📉 NSE 2024 Trading Opens on a Four-Year Low

Trading at the Nairobi Securities Exchange (NSE) hit a four-year low on the first day of the year, with only 904,000 shares valued at Ksh12.5 million traded. This starkly contrasts with 2023's opening, which saw 1.73 million shares valued at Ksh33.8 million. 

The decline reflects low investor confidence, evidenced by a Ksh4.2 billion loss in share value traded over the past year, dropping from Ksh9.4 billion in September 2022 to Ksh5.2 billion in September 2023. The NSE 20 Share Index also fell from 1,718 points to 1,508 points. Read More.

Want more details? Check our full weekly update here:

This week’s finance tips

It’s 2024! Are you ready to conquer the financial frontier with us? Welcome to Money254's Money Tips! Here, we share quick and easy tips that make understanding and managing your money a breeze. We break down the tricky parts of your finances and the financial landscape, making it simple and clear for you. Stay tuned for helpful tips every week.

Money254 MoneyTok of the week:

Dreaming of early retirement? It's not just a wish; it's a journey that demands sacrifices, but fear not, it's totally doable! Dive into our video of the week where we explore some of the things you can do to give yourself a chance at retiring early.

@money254hq

Tips to Achieve Early Retirement in Kenya. While desirable by most, early retirement will require quite a great deal of sacrifice on your ... See more

That’s a wrap for this week’s Money Weekly!

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Eric and the Money254 editorial team.