The Kenyan Shilling has sunk to an eight-week low against the US dollar, as the currency faces mounting pressure from ongoing political unrest and declining economic indicators.
This sharp depreciation threatens to ignite a new wave of inflation for consumers, driving up prices on imported goods and exacerbating the financial strain on households across the nation.
Recent market data reveals a stark drop in the shilling's value, with commercial banks trading the dollar at between Ksh131 and Ksh132.85. The retail market has seen rates soar as high as Ksh135 per dollar.
According to the Central Bank of Kenya (CBK), the official exchange rate showed the shilling opening the week at Ksh130.73, a significant dip from the previous week’s Ksh129.56.
This dramatic shift comes on the heels of a period where the local currency had shown resilience, recovering from a record low of Ksh160.67 against the dollar in February. At that time, the shilling had strengthened by 18.1 per cent, bolstered by the partial buyback of the 2014 $2 billion Eurobond, which had alleviated market concerns about the country's debt repayment capabilities.
However, the recent downturn has been accelerated by the socio-political turbulence stemming from anti-government protests, which have disrupted key sectors such as trade and tourism.
The protests have led to a noticeable decline in tourism activity, with numerous hotels reporting cancellations and postponements as the peak July-September season approaches.
The shilling’s fall is compounded by a drop in remittance inflows, which are crucial for stabilising the current account and supporting the foreign exchange market.
Remittances from Kenyans abroad plummeted to $345.9 million (Ksh45.5 billion) in June, down from $404.4 million (Ksh53.2 billion) the previous month. This decline further strains the currency as the government relies on these funds to bolster the local economy.
For consumers, the weakening shilling portends a rise in the cost of imported goods and services, including fuel, which could significantly impact household budgets.
Conversely, expatriates and multinational employees paid in dollars may see some benefit, as their higher earnings can translate into increased purchasing power within the local market.
Exporters are also likely to gain, as their products become more competitively priced on the global stage.
