What’s Happening in Kenya?
Kenya’s President, William Ruto, has advised citizens and investors to let go of their US dollar holdings as its value is decreasing rapidly due to global factors such as the Russia-Ukraine war. In a speech, he gave free advice to people holding dollars that they might go into losses and urged them to take action before the market changes in a couple of weeks.
Reinstate the Interbank Exchange Market
To ease the burden of people who want to realize their returns in dollars, the government of Kenya, through the central bank, is having conversations to reinstate the Interbank Exchange Market. This market has not worked for some time, and the players in that sector, including the banks, are coming forward to participate and work with the central bank. This collaboration will help Kenya regain control over its currency market and prevent distortion by brokers, who are banned in all other sectors except for the exchange.
Measures to Support the Kenyan Shilling
President Ruto also announced measures that will enable oil importers to buy oil using Kenyan Shillings instead of dollars. This move will ease the burden of fuel companies who do not have to look for dollars every month. By paying for fuel in Kenyan Shillings, these companies can avoid the volatility of the US dollar and stabilize their costs.
Ditching the US Dollar Trend
Kenya is just one of many countries that have announced this month that they are ditching the US dollar for international trade in favor of their national currencies. This trend may further decrease the value of the US dollar in the international market, making it less attractive for countries to hold it as a reserve currency.
In conclusion, President Ruto’s advice to let go of US dollar holdings reflects a growing trend among countries to move away from the US dollar for international trade. The collaboration between the Kenyan government and the Central Bank of Kenya to reform the Interbank Exchange Market will help Kenya regain control over its currency market and prevent distortion by brokers. Measures to support the Kenyan Shilling, such as allowing oil importers to buy oil using Kenyan Shillings, will help stabilize costs and avoid the volatility of the US dollar. It remains to be seen what will happen to the US dollar if this trend continues, but it is clear that more and more countries are looking to diversify their currency reserves.