Kenyan Shilling Falls To The Lowest In History Against The Dollar

By Juma / Published February 27, 2023 | 10:54 am

KEY POINTS

Pressure on the Kenyan shilling will continue coming from the high global crude oil prices on the back of persistent supply chain bottlenecks coupled with high demand.

KEY TAKEAWAYS

The need for Government debt servicing continues to put pressure on forex reserves given that 69.3 percent of Kenya’s External debt was US Dollar denominated as of October 2022 will pile more pressure on the shilling.

The shilling is however expected to be supported by improving diaspora remittances standing at USD 349.4 mn as of January 2023, representing a 3.2 percent y/y increase from USD 338.7 mn recorded in a similar period in 2022.

During the week, the Kenyan shilling depreciated by 0.6 percent against the US dollar to close the week at 126.4 shillings from 125.6 shillings recorded the previous week.

The depreciation of the local currency was partly attributable to sustained high dollar demand from importers, especially oil and energy sectors against a slower supply of hard currency.

On a year-to-date basis, the shilling has depreciated by 2.4 percent against the dollar, adding to the 9.0 percent depreciation recorded in 2022.

Pressure on the Kenyan shilling will continue coming from the high global crude oil prices on the back of persistent supply chain bottlenecks coupled with high demand.

Pressure will also come from the ever-present current account deficit estimated at 4.9 percent of GDP in 2022, despite improving by 0.3 percentage points from 5.2 percent recorded in 2021.

Key to note, Kenya’s forex reserves declined marginally by 0.2 percent to remain relatively unchanged at USD 6.9 bn as of 23^rd February 2023.

As such, the country’s months of import cover remained unchanged at 3.8 months similar to what was recorded the previous week, remaining marginally below the statutory requirement of maintaining at least 4.0 months of import. The chart below summarizes the evolution of Kenya’s months of import cover over the last 10 years.

The Central Bank of Kenya has not clearly stated the measures being put in place to cushion the Kenyan shilling against the US Dollar.

About Juma

Juma is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it.(020) 528 0222 or Email: info@sokodirectory.com

View other posts by Juma