The Kenyan shilling has hit a new record low crossing the 142 mark on Wednesday to the US dollar, signalling a further jump in the cost of living.
Central Bank of Kenya (CBK) quoted the local currency at 142.11 on July 26, compared to a month ago when it traded at 140.34 on June 27.
The Kenyan shilling has been on the losing streak against the dollar since early 2020, imposing multiple economic shocks such as increased import costs.
Year-to-date, it has lost about 20 per cent of it value, meaning importers now incur an extra Sh20 on the amount they used to buy a dollar a year ago for their goods.
Since early 2020 when it started depreciating, it has lost about 43 per cent, with analysts projecting further drop.
Absa Bank’s chief economist Jeff Gable in May said the local currency will continue shedding its value against the US dollar for the remaining quarters this year, rallying to a low of 150 come December.
“The currency was projected sometime last year to continue weakening to a better part this year, on the back of hiked interest rates by global lenders in efforts to curb inflation,” Gable said.
The latest developments now pile pressure on manufacturers and importers with an expected rise in commodity prices, as the country remains a net importer.
Banks have been asking for more than Sh142 for a dollar, way above the Central Bank of Kenya's average, meaning traders will have to cough more to get enough to pay for imports.
In 2022, the Kenyan shilling depreciated against, the US dollar (7.5 per cent), the UAE dirham (7.5 per cent), Saudi Riyal (7.4 per cent) and the Chinese Yuan (3.1 per cent), according to the 2023 Economic Survey.
Within the EAC, the Kenyan shilling weakened against the Tanzanian and Ugandan shilling by 7.0 per cent and 4.5 per cent, respectively.
Kenya Association of Manufacturers (KAM) says industries will have to pass extra costs to consumers amid the non-ending appreciation of the dollar, with raw materials being the most hit in the sector.
Other commodities whose prices are expected to increase include petroleum products, which will have implications for the cost of transport, farm production and electricity.
Prices of food products such as cooking oil, wheat, maize and other imports are also expected to increase, as the country remains a net importer mainly from Asia.
This will add pressure to households for a longer period, as reiterated by the International Monetary Fund (IMF), who says Kenya will need more than three years to recover from the output losses occasioned by the weakening shilling against the US dollar.
In its sector assessment report released last week, the lender says economic contraction occasioned by the appreciating dollar will depress the economy for a period not less than 10 quarters.
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