Sanyatti
Member
The Kenya Shilling has touched a new historical low of Ksh.118 against the US dollar as the local unit weakness extends into the second half of the year.
The local unit was quoted at Ksh.118.02 at the close of trading on Tuesday, dipping from Ksh.117.98 at Monday’s close according to the Bloomberg KES: USD spot-rate.
The continued weakness of the local currency unit has been attributed to increased demand for dollars particularly from the energy and manufacturing sectors as commodity prices such as oil lift off across the globe.
So far in 2022, the Kenyan Shilling has depreciated against the US dollar by an estimated 4.31 per cent.
Analysts across the board expect the Shilling to remain under pressure for the rest of the year as global prices remain sticky at record highs, exacerbated in part by the Russia-Ukraine war and output gaps from oil exporters.
Further, merchandise traders are expected to sustain the demand for the green buck as many stock up on holdings of hard currency to meet rising import costs.
Beyond the greater demand for US dollars, the local unit is expected to come under pressure from a widening current account deficit as the difference between imports and exports widens up.
The Central Bank of Kenya (CBK) has estimated the current account deficit at 5.9 per cent of GDP at the close of 2022.
Rising fuel import costs have so far in the year served to offset increased receipts from exports and diaspora remittances.
Increased external debt service costs at the start of the year have also served as a dampener to the value of the Kenyan Shilling as the payments eat into CBK’s forex reserves.
The usable foreign currency reserves have nevertheless remained above the statutory requirement of maintaining at least four months of import cover providing some anchoring to the Shilling.