The Kenyan Shilling dropped to a ten-month all-time low against the US Dolar Thursday when it crossed the Ksh.111 mark, according to the data by Metropol Harvest.
The shilling was once spotted at this mark last year on December 22 when it traded at Ksh.111.68
On October 19, the Shilling was quoted at 110.9.
Weakening of the shilling can mainly be attributed to increased dollar demand from the energy sector importers.
A weaker shilling means importers spend more to bring in goods such as petroleum products and raw materials for factories, a development which may result in price increases for consumers in a net import economy.
For instance, oil imports will be slightly more expensive even while holding prevailing international crude prices at constant.
At the same time, government foreign debt obligations will be costlier with a weaker shilling as will be foreign currency denominated repayment by companies and individuals.
- Shilling now 0.77 units shy to hit 111.68 level last seen in Dec 2020
- Kenya Shilling depreciated by 2.4% against dollar in Q3
- Coronavirus uncertainty to keep affecting Kenya shilling
On the opposite side of the coin, however, the cost of Kenyan exports will be cheaper in the international market encouraging more sales past Kenyan borders.
On a YTD basis, the shilling has depreciated by 1.6 percent against the dollar, in comparison to the 7.7 percent depreciation recorded in 2020.
“We expect the shilling to remain under pressure for the remainder of 2021 as a result of rising uncertainties in the global market due to the Coronavirus pandemic, which has seen investors continue to prefer holding their investments in dollars and other hard currencies and commodities,” said analysts from Cytonn.
Both the International Monetary Fund (IMF) and the World Bank have encouraged Kenya to ‘allow the weakening of the shilling’ seeing it as a shock absorber in the midst of the pandemic.
This by implying a weaker currency will grow the country’s exports by offering them at a bargain at the global market place.