Expensive Shilling: CBK Uses 300 Million US Dollars To Protect The Shilling

The Kenyan shilling has been under immense pressure from the US dollar, hitting a 10-month low a week ago in what market analysts termed as a result of increased demand from importers, especially in the oil industry.

Stats now show that the Central Bank of Kenya has used more than 300 million US dollars to protect the shilling from the bullish dollar in the last one month.

The shilling has been resilient since 2018 kicked off and analysts had foreseen it maintaining the same trend to the end but November proved them wrong. Analysts are now saying that the local currency might slide further to hit 105 shillings against the dollar.

CBK has been engaging in periodic interventions in an effort to limit the movement of the shilling and shield it against taking the hit from the dollar.

Efforts by the CBK have seen Kenya’s foreign currency reserves dipping to 8.15 billion dollars in a period of one week from 8.45 billion dollars at the start of the month of October.

According to analysts from Cytonn Investments, the woes facing the shilling had been foreseen in their report released in January but assured investors that the hit from the dollar will only be on short-term as the shilling is set to receive a reprieve from increased diaspora remittances, increased earnings from agricultural exports among others.

Last Thursday, the local currency weakened to a 10-month low to close the day at 103.05/25 as a result of increased demand from oil importers who were bringing in a stock for the festive season. On the same day, some traders quoted the shilling at 104 shillings to the dollar.

Since the year begun, Kenya’s import bill has increased to 13 billion dollars compared to 4.71 billion dollars of export earnings. This implies that Kenya is importing more than exporting, putting more pressure on the shilling.