Kenyan Banks Lose Billions Due to South Sudanese Pound Devaluation

When South Sudan became independent, financial institutions flocked the country to get hold of a wide range of investment opportunities that had been uncovered in the country. Such financial institution from Kenya included banks that invested heavily into the world’s youngest nation.

South Sudan uses a South Sudanese Pound as her main currency. In the recent months, as war broke out in the country and as it rages on, the pound started being devalued and now the Kenyan banks are feeling the heat. On Tuesday, the Kenyan banks announced to have lost a total cash amounting to 12.7 billion shillings with Equity Bank having lost 5.7 billion shillings in terms of forex. Equity announced this after it released its annual financial results for the year that ended December 2015. Economic analysts project that the loss will scale even higher as Co-op bank which also operates in South Sudan plans to announce its annual financial results for 2015.

Kenya Commercial Bank felt the much hit after it announced that it had lost a total of 6.1 billion shillings due to the devaluation of the South Sudanese Pound while another lender, CFC Stanbic Holdings lost a total of one billion shillings. The good news to the shareholders in these institutions is that the loss in South Sudan did not affect the overall net profits.

Economic analysts have said that the situation will be even worse in the event that the institution decide to sell part or all of their stakes in South Sudan as the prices will be too low. Analysts suggest the need for the institutions to watch and wait but be ready to dispose of their assets to avoid further losses if the situation continuous for the next one month. The South Sudanese Pound has been devalued by more than 100 percent since last year December. South Sudan is also experiencing labour crisis as the main manpower takes off due to the civil unrest in the country.

Article by Fred Juma.