Who’s Winning as the Kenya Shilling Loses?

Welcome to our 13th Money Weekly Roundup of 2023. This week, Kenyans breathed a momentary sigh of relief as EPRA broke the trend and kept the fuel prices steady at the pump. This is as concerns mount over the continued fall of the Shilling against major world currencies and its effect on debt repayments and the cost of living.

Below, as we do every Friday on Money Weekly, we break down for you the top money news from the last seven days that may have an effect on your pocket.

What happened this week

🔄 Govt Pulls U-turn: After public uproar, Interior CS Kithure Kindiki revoked the Nov 7, 2023 Gazette Notice hiking fees for key services issuing a revised notice, albeit with minimal adjustments that are to take effect from Jan 1, 2024:

• ID Applications: First-time ID application fee now Ksh300 from Ksh1,000.

• Lost ID Replacement: Replacement fee reduced to Ksh1,000 from Ksh2,000.

• Passport Pain: Hiked fees for replacing lost, damaged passports unchanged. Read More.

💸 Debt Dynamics: Kenya's external debt stock and repayment costs are rising daily due to the Shilling's depreciation against the dollar, highlighting the country's vulnerability to foreign exchange fluctuations. A reminder: we’ve got a $2bn Eurobond to pay in June 2024. That payment in local currency is now Ksh311.6 billion, up from the initial Ksh240 billion, reflecting the impact of the weak shilling.

Global credit rating agency Fitch has taken notice, issuing a warning that a significant depreciation in Kenya's exchange rate could exacerbate the country's debt servicing challenges, especially in the near term.

But there’s hope the country could be rescued from plunging into a financial crisis after the International Monetary Fund (IMF) confirmed that it was mobilising funds to help the Kenya repay the $2bn Eurobond. Reuters reports that, if approved by the fund’s executive board, Kenya will have access to a total of $3.88 billion.

💹 Currency Play Winners: The depreciation of the Kenyan Shilling is proving advantageous for diversified portfolios! Assets linked to foreign currencies, especially the US dollar, are generating better returns. Investors in regional foreign stock exchanges, including in companies like MTN Uganda and Bank of Kigali, are also experiencing increased dividends thanks to the relative weakness of the Kenya Shilling.

Read more about who is winning as the Kenyan Shilling depreciates, and also find out more about the effects of the Shilling’s depreciation here.

💼 Budget Bloom: Parliament green-lights a Ksh200 billion budget increase, with miscellaneous expenditure tripling to Ksh60 million in Q1 of 2023/24. The additional funds are to be spent on among other things, fertiliser subsidies, maize dryers, the National Cereals and Produce Board, the Coffee Cherry Fund, and education initiatives. Get the details on the budget increase here.

🏠 Taxing Times for Airbnb Hosts: KRA pushes for tax compliance among Airbnb hosts, engaging in information exchange with the Irish Tax Authority. We’re still waiting to see if Airbnb Hosts will be back-paying the 2% Tourism Levy for the 2021 and 2022 years.

🍺 ‘Sin Tax’ Revenue is on the Decline as people are consuming less: National Treasury foresees a potential drop in excise-duty-related revenue of about Ksh133.5 billion in 2023/24. A reduction in the consumption of beers, spirits and cosmetics, coupled up with lower motor vehicle and fuel imports to blame.

While spirits are down, coffee is looking up! The government has announced it is opening the coffee auction's direct market, which should strengthen coffee farmer’s ability to to get fair prices locally and internationally.

📊 Corporate Highlights: Safaricom PLC posts robust H1 2023 profits. Meanwhile, Equity Bank entered the overdraft market with a real-time overdraft facility, challenging Safaricom’s Fuliza and Faraja products by offering it’s customers an overdraft of up to Ksh100k.

Want more details? Check our long-form weekly update here:

Here’s what happened in the media this week:

• Who is Winning as the Kenya Shilling Depreciates? - Money254 Weekly News Roundup

• House Team Wants Banks to Help Rescue Falling Shilling - People Daily

• Nairobi Suburbs Post Fastest Land Price Surge in Four Years - BD Africa

• All About Umba Savings Account Offering Up to 16% Interest - Money254 Review

• New Eurobond Loading as Kenya Picks Arrangers - The Star

• Tala Rolls Out Flexible Loan Top-up Feature For Customers - Capital FM

• CBK Governor At Pains to Explain Performance of Kenya Shilling - Citizen Digital

• IMF Rescues Kenya From Ksh300bn Eurobond Scare - Reuters

This week’s finance tips

The National Treasury revealed this week that despite significant strides in financial inclusion, Kenya's savings rate remains low at about 12%.

We know times are tough. Here are this week’s selection of our editorial team’s favorite tips and articles from across Money254, curated just for you:

That’s a wrap for this week’s Money Weekly! Also, don’t forget to download the Money254 App on the google play store and remember that we can help you compare over 300 loans, savings accounts, current accounts, and more if you’re thinking about your next product.

Sincerely,

Eric and the Money254 editorial team.