Kenyan Shilling Hits Record Low Vs Dollar: Economic Challenges Ahead
The Kenyan Shilling has reached a new all-time low of 145.261 against the U.S. Dollar, which could put the country in a position where imports will be more expensive and debt servicing will be difficult in an already weakened economy.
The local currency fell against the U.S. dollar on Wednesday, from 145.15 on Tuesday evening, as manufacturers and petroleum traders competed for limited market supplies.
Since the middle of 2021, when it was worth Ksh106.54, the Kenyan Shilling has been falling due to increased demand for dollars by importers and manufacturers and feeble inflows.
Manufacturers and importers will likely pass on rising costs to consumers, which could exacerbate the plight of already struggling households.
Kenya imports, amongst other necessities for most households, edible oils, petroleum, maize, wheat, machinery, clothing, and fertilizers.
ALSO READ: Ruto & Raila Team Seal IEBC Changes Deal
Treasury will also be forced to spend more to service Kenya’s debt, further pressuring the country as tax revenue pressure increases.
“At the current rate, the shilling will reach Ksh 150 per dollar in October. If our external debt reaches $40 billion, it will total 6 trillion Kenyan shillings. Considering that the domestic debt is also inching toward the KSh 5 trillion mark, this is a worrisome prospect. This will increase the total public debt to Ksh 11 trillion, economist Ephraim Njenga predicted.
“These are staggering numbers. The nation is perilously close to bankruptcy. Where does the regime find the energy and leisure to conduct premature election campaigns? All hands must be on deck to prevent the economic collapse of the nation.”
During the fiscal year that ended in June, approximately two-thirds of total debt was comprised of foreign borrowing.
The country began the new fiscal year with a total debt burden of approximately Sh10.19 trillion, up 18.08 percent from Sh8.63 trillion the previous year.
According to a report published by EFG Hermes in July, the shilling could continue to depreciate against the dollar and reach Ksh150 by December 2023.
That would increase the nation’s debt.
Kenyan Shilling Hits Record Low Vs Dollar: Economic Challenges Ahead