The cost of acquiring a dollar by importers in the country has increased by about 21 per cent in the past year, pushing further the cost of imports.
Importers now, compared to a year ago, have to pay an extra Sh21 for a dollar for trade, with the burden passed to consumers.
The latest weekly bulletin by the Central Bank of Kenya ( CBK) quoted the Shilling at 144.04 on Friday, crossing yet another record-low mark against the greenback.
Year-to-date, it is a 20.6 per cent shed in value, and 45 per cent since it started weakening in early 2020.
In the parallel exchange market, traders are accessing a dollar at highs of 150 and 151, with experts projecting that traders using the parallel market will be accessing the dollar at more than 15 units above the official rate till October.
Money market analysts at ICEA Lion say the local currency will hit an official rate of between 148 and 150 units against the greenback by October and 165-170 in banks and exchange bureaus.
Jeff Gable, the head of FICC Research and chief economist for Absa, early this year said the shilling could hit a low of 150 by December, despite the slight ease in global economic constraints.
The apex bank, however, maintains a brave face saying the Shilling remains relatively stable against major international and regional currencies.
In the last Monetary Policy Meeting (MPC), CBK governor Kamau Thugge said the government is working to increase exports as a way of boosting forex reserves that have been tanking in the past months.
The apex bank's data shows that the usable foreign exchange reserves were $7.29 billion (Sh1.05 trillion) (3.98 months of import cover) on Friday, touching below the country's critical threshold of 4 months of import cover for the second time since November last year.
This is despite remittance inflows in July hitting a record monthly high of $378.1 million (Sh54.5 billion) compared to $319.4 million same period last year.
The cumulative inflows for the 12 months to July 2023 totaled $4.016 billion (Sh590.4) billion compared to $3.9 billion (Sh507 billion) in the same period in 2022, an increase of two per cent.
The banking regulator said the strong remittance inflows continue to support the current account and the stability of the exchange rate.
The US remains the largest source of remittances in Kenya, accounting for 55 per cent.
Kenya being a net importer, consumers will remain exposed to hiked commodity prices even though inflation fell within the regulatory levels of 7.3 per cent last month.
The monthly inflation had hit a high of 9.2 per cent in February this year, on the back of increasing food prices which continued to put households under pressure and raise the cost of living.
Economists have further projected that it would Kenya at least three years to recover from the output losses occasioned by the weakening shilling against the US dollar, meaning consumers have to brace themselves for costly commodities for much longer.
The IMF in a recent external sector assessment report said the economic contraction occasioned by the appreciating dollar on emerging economies such as Kenya, is much deeper and will take longer to ease.
“Output in advanced economies recovers three quarters after the appreciation while emerging market output remains depressed 10 quarters out,” IMF says.
The lender has also called out central banks in Africa for selling forex reserves to manage currencies, terming it counterproductive.
It said the exchange rate policies are not flexible as selling reserves will not ease inflation nor stabilise currencies.
The depreciating shilling has had far-reaching implications on the country's economy, with the latest statistics from the National Treasury indicating that the country's debt has been increasing by Sh2.5 billion on the poor currency.
Gross debt stock climbed Sh1.56 trillion for the financial year ended June, fresh data released by the Treasury shows, breaching the Sh10 trillion mark by Sh189.53 billion.
Kenya ended the last financial year in June with a gross total debt load of Sh10.19 trillion, a growth of 18.08 percent over Sh8.63 trillion a year ago, which was the last full fiscal year for former President Uhuru Kenyatta.
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