Inside Ruto's Plan to Lower Exchange Rate to Ksh85 Against 1USD

Trade Cabinet Secretary, Moses Kuria revealed President William Ruto's plan to bring down the US dollar-Kenyan shilling exchange rate.

Kuria, on Saturday, March 4, explained that Kenya Kwanza government will use the balance of trade and delayed debt payment as key instruments in lowering the exchange rates.

His Energy counterpart, Davies Chirchir, was at the centre of the move to ensure that Kenyans get affordable fuel and the exchange rate is drastically reduced.

"My distinguished colleague Davies Chirchir is working hard to restructure the fuel supply chain in order to ease the pressure on the Shilling.

Trade CS Moses Kuria addresses mourners during his sister, Pauline Nyokabi Kuria's burial on Monday, January 23, 2023.

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MOSES KURIA

"He is imminently succeeding after which I see an exchange rate of Ksh85 to the dollar," Kuria detailed.

By March 4, 2023, 1 US Dollar was trading at around Ksh128 when buying and Ksh137 when selling it within local financial institutions.

Howeve, Economist Churchill Oguttu argued that delayed payments on oil imports alone will hardly ease pressure on the Shilling.

"Oil though quite a significant contributor to the import bill is not the only factor. There are other factors that contribute to exchange rate dynamics, and restructuring of oil supply chains will not see a faster appreciation of the Kenyan Shilling," Oguttu countered.

In context, the Economist stated that it's almost impossible to cut off importers from access to the Dollar since their businesses rely largely on the American currency.

"So even if there's a coherent plan to restructure the fuel supply chain, the OMCs still need access to Dollars for the imports, but the price for Dollar is determined by market forces, and not efficiencies," he added.

Energy Minister Davis Chirchir, on Monday, February 27, warned that the government was concerned with the rising pressure on the foreign exchange rate.

Kenya Kwanza government is seeking a year moratorium on imported oil instead of making payments immediately when the products are delivered at the port of entry.

Kenya's useable foreign exchange reserves reportedly shrank below statutory requirements, which should be enough to cover four months of imports of all kinds.

A ship docked at the Port of Mombasa.

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"When products arrive in Mombasa (port) today, we pay about Ksh64 billion ($500) million within three days. That causes significant pressure," Chirchir explained in an interview with Reuters.

Chirchir stated that importers and their suppliers will be notified of payments when they are due.