The Kenyan Shilling has remained unstable against the US Dollar in the recent past, signaling economic headwinds amidst the ravaging coronavirus pandemic.
According to the Central Bank of Kenya (CBK), the shilling is now 0.41 units away to hit 114 level against the dollar currently exchanging at 113.59.
While the weakening of the shilling has not been traced to one specific factor, it can be pointed to a number of elements dwindling the local unit’s value.
This includes rising uncertainties at the global marketplace and a skewed demand for dollars, especially from oil importers.
On January 27, 2022, Brent crude oil hit Ksh.10,219.63 ($90) for the first time in eight years.
Prices had surged on Wednesday, with Brent climbing above $90 a barrel amid tensions between Russia and the West. Threats to the United Arab Emirates (UAE) from Yemen’s Houthi movement had added to oil market jitters.
In most cases, the 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.