Kenyan shilling hits a record low of 150 to the US dollar
On Monday, the Kenyan shilling reached a historic low, compounding the challenges faced by the population, who are already grappling with high inflation and a slew of new taxes. Official data from the Central Bank of Kenya (CBK) indicates that the US dollar was trading at slightly over 150 shillings.
The depreciation of the Kenyan shilling has been an ongoing trend for several years, with a significant drop of nearly 24% in the past year. Some commercial banks and foreign exchange bureaus have been transacting at or above the CBK level in recent weeks.
This decline can be attributed to various factors, including elevated levels of national debt and reduced government revenues. The consequences of this devaluation have affected various aspects of the economy, from the stock market to consumer prices. Inflation remains stubbornly high, standing at an annual rate of 6.8% as of September, with persistent increases in food and fuel prices.
The exchange rate's recent movement reflects the strengthening of the US dollar, driven by the Middle East crisis that is driving investors towards safe-haven assets. High US treasury yields have contributed to this trend. Kenya's economic challenges are compounded by its substantial debt burden, which had reached over Ksh10.1 trillion shillings (around $67 billion) by the end of June, accounting for about two-thirds of the country's GDP. Servicing this debt, primarily owed to China, has become more expensive as Kenya's currency has depreciated. Moreover, the government is facing the maturity of a $2 billion Eurobond in June of the following year. Furthermore, Kenya's economic growth has decelerated, dropping from 7.6% in 2021 to 4.8% last year due to the global repercussions of Russia's invasion of Ukraine and a severe regional drought that significantly impacted the crucial agriculture sector.