The Kenyan shilling plunged to an all-time low of 150 to the United States dollar (USD) on Monday, Oct. 23. The currency has steadily declined over the past year, losing almost 24% of its value.
- Data from the Central Bank of Kenya (CBK) showed that the dollar sold at just over 150 shillings per USD, while some commercial banks and Bureau de Change had already reached that level or higher in recent weeks.
- The effect of the currency depreciation reflects on Kenya’s imports and its debt levels.
- While imports are becoming more expensive, the country’s debt burdens are compounding, making repayment difficult.
- But more than this is the effect on Kenyans, who are already battered by soaring inflation and increased taxes.
What was said
- According to the CBK Governor, Kamau Thugge, the shilling has been overvalued for several years.
- Thugge said that the World Bank and the International Monetary Fund considered the shilling to be between 20% and 25% overvalued five years ago.
- He added that Kenya’s foreign exchange reserves had dropped significantly and could only cover less than four months of imports. He said, “This is still sufficient to deal with any emergencies.
- Thugge said:
“I think for several years now, we have had an overvalued exchange rate. We have tried to maintain a fairly strong exchange rate artificially, [but] at the cost of losing international reserves.”
- On Kenya’s foreign reserves, he said:
“It is still sufficient to address any emergencies, but there has been that decline in the level of reserves trying to defend perhaps an overvalued exchange rate.”
- Kenya’s economy has experienced challenges stemming from the Russian-Ukraine war and a regional drought that crippled the country’s agricultural sector.
- According to the country’s Treasury figures, Kenya had accumulated more than 10.1 trillion shillings ($67 billion) at the end of June 2023.
- President Williams Ruto introduced a series of tax hikes and new taxes designed to increase government revenue.