Is Kenyan shilling overvalued against dollar?

Kenya is currently facing a challenging economic landscape with the Kenyan shilling being nearly 20% overvalued against the dollar in real terms. This overvaluation is highlighted in a report by Renaissance Capital, indicating that it is making Kenya's exports uncompetitive in the regional markets. At the same time, Kenya Airways has been under scrutiny for its financial losses, including a staggering $17.7 million loss in the purchase and sale of two B737-300 planes between 2010 and 2015, as revealed by an audit report by Deloitte. The financial struggles of Kenya Airways have been a recurring theme in recent times, with the airline facing issues such as flight delays and technical challenges. Despite efforts to normalize flight schedules and reduce costs through initiatives like Operation Pride, the road to profitability remains long for the airline. While there are hopes for a reduction in foreign exchange losses and improved revenues, significant challenges lie ahead for Kenya Airways. One of the key challenges for Kenya Airways is replicating the success of its largest shareholder, KLM Dutch Airlines. However, the unique market environments in which the two airlines operate make direct comparisons difficult. With KQ operating in a highly competitive and cost-intensive market, achieving the level of success enjoyed by KLM is a complex task. In the currency market, the Kenyan shilling's overvaluation against the dollar poses a significant risk to the economy. While the nominal value of the shilling remains stable, the real overvaluation makes Kenyan exports appear more expensive than they actually are. This situation is exacerbated by a decline in exports as a percentage of GDP, currently standing at around 6%. Given Kenya's status as a net importer, this low export ratio is a cause for concern. Despite the subjective fair value estimate of 119 units against the dollar, the stability of the Kenyan shilling in the short term is expected due to the country's substantial foreign exchange reserves. However, addressing the overvaluation issue and boosting export competitiveness will require concerted efforts and strategic interventions in the economic landscape of Kenya.