As the Covid-19 pandemic continues to sweep across the African continent, African currencies are feeling the heat from international giants such as the US dollar.
All select currencies depreciated against the US Dollar except for the Malawian Kwacha, which remained relatively stable against the dollar attributable to the high forex reserves, which continue to provide a buffer to the Kwacha against exchange shocks.
The depreciation recorded by the currencies is partly attributable to the ongoing COVID-19 pandemic, which has seen a fast-falling demand for export commodities given the lockdown measures put in place.
The Zambian Kwacha was the worst performer, depreciating by 28.6 percent against the dollar YTD, owing to the low economic productivity given the fall of copper prices as well as increased imports, which continue to increase pressure to the currency.
Credit Rating Agencies such as Moody’s had flagged the default risk and thereby downgraded their assessments of the country’s debt in April to Ca from Caa2 and revised the outlook to negative from stable.
The Kenya Shilling depreciated by 5.1 percent in H’1 2020 to close at 106.5 shillings against the US Dollar, attributable to high dollar demand from foreigners exiting the market amidst the pandemic.
According to a report compiled by Cytonn Investments, the Tanzania shilling is doing better than both the Kenyan and the Ugandan shilling. In 12 months, the Tanzania shilling has only shed on 0.8 percent, with a drop of 0.9 percent on a year-to-date basis.
The Kenyan shilling has lost 4.1 percent to the dollar in 12 months and 5.1 percent on a year-to-date basis. The Ugandan shilling, on the other hand, has lost 0.8 percent to the dollar in 12 months and 1.6 percent on a year-to-date basis.
The Ghanaian Cedi has lost 6.5 percent in 12 months and 1.2 percent on a year-to-date basis. The South African rand is among the worst-performing currencies in Africa. It has lost 23.1 percent against the dollar in 12 months and 23.7 percent on a year to date basis.
The Nigerian Naira is also struggling. It has lost 17.7 percent in 12 months and 17.6 percent on a year-to-date basis. The Botswana Pula has lost 11.0 percent in 12 months and 13.0 percent on a year-to-date basis.