NAIROBI, Kenya August 26 — The Kenya shilling hit an all-time low on Friday as economic uncertainties loom around the next head of government after nine petitions were filed challenging Presidential-elect William Ruto’s victory.
The local currency, which has been declining for the past 16 months traded at 120.10 units to the dollar Friday morning before stabilizing to 119.90 in the afternoon.
According to various forex traders, the local currency has been weighed down by high oil prices and hard-currency demand from sectors including energy and manufacturing.
The traders also noted that month-end foreign currency demand from importers has been pressuring the shilling and this is expected to continue in the coming days.
Researchers at AIB Capital attributed the current depreciation of the shilling to high petrol and diesel prices.
“We anticipate that diesel and petrol prices will continue to increase as they trail global crude oil prices that have been rising due to geopolitical tensions in Eastern Europe. This will exert more pressure on the shilling, which will likely lead to further depreciation,” said the researchers.
The shilling has also been dropping on the back of a fast-rising import bill that has outstripped earnings from exports, diaspora remittances, and tourist receipts.
According to the Kenya National Bureau of Statistics(KNBS), Kenya’s value of imports stood at Sh2.151 trillion in 2021 while the export earnings stood at Sh743.7 billion.
Diaspora inflows, on the other hand, dropped to a 13-month low of Sh38 billion in July attributed to the high cost of living globally.
A depreciating shilling means importers spend more to bring in goods to the country, and with Kenya being an import-dependent country the additional expenses are passed on to consumers leading to an increased cost of living.
The country’s inflation stood at an all-time high of 8.3 percent in July on the back of costly food and fuel.
