The Kenyan shilling on Monday hit an all-time low against the US Dollar, setting the stage for costly imports including fuel, electricity, and debt servicing distress for loans in foreign currency.
Market data showed that the shilling exchanged at an average of 142.98 as demand for the greenback by manufacturers increased.
The Kenyan shilling has been on the decline since the beginning of this year. The local currency started the year at an average of 123.42 against the greenback.
This is the second time in under a week that the local currency has slid further low, putting pressure on importers.
Importers gobble the biggest share of the country's dollar demands with most going into importing raw materials for companies, fuel, wheat, cooking oil and clothes among other things.
Exchange rates on Friday stood at Ksh142.886. Commercial banks are quoting the shilling at between Ksh143.00 to Ksh143.20 per dollar which is an increase from Friday’s rates of Ksh142.90/143.00.
Impacts of shilling depreciation
The weakening of the shilling against the dollar will likely see the cost of basic commodities go higher at a time when many Kenyans are already complaining about the high cost of living.
A higher exchange rate means that importers in Kenya will pay more for raw materials which will see the increased cost of production passed on to the consumer.
Electricity consumers will have to pay more due to forex charge which is factored in power bills.
Additionally, the country is likely to pay more as payment of fuel imported on credit falls due. The cost will be passed to consumers at the pump.
Flower, tea and coffee exporters on the other hand will rejoice as their earnings register an increase.
Analysts have warned that Kenyan currency could face more downward trend but likely to recover towards the end of the year.
EFG Hermes Research in July indicated that the Kenyan Shilling will continue weakening against the dollar hitting Ksh150 by December 2023.
