The Kenya shilling hit a 15-month all-time low of 115 units against the US dollar Monday, the lowest record in history.
According to the Central Bank of Kenya (CBK), the Kenya shilling hit a record low to trade at an average of Ksh.115.0 per dollar.
This is the lowest a shilling has dropped in history. It dropped to 114 level on March 8 when benchmark crude futures surged to Ksh.14,817.81. It has since dropped to Ksh.12,080 a burrel.
The depreciation is partly attributable to increased dollar demand from the oil and energy sectors.
This has been fueled by the economic fallout over the continued war between Ukraine and Russia, with the latter being second-largest producer of crude oil globally.
Even as the value of local currency continues to go under, the Central Bank of Kenya (CBK) has remained positive that the unit is within its anticipated limits with its peer currencies in the region.
“The dollar index has appreciated by 3.2 percent so far in 2022 which is very significant. We have depreciated by about 1.3 percent and you can see that matches well with the others. We are feeling okay in terms of our operations in the Forex market,” said CBK Governor Dr. Patrick Njoroge on Wednesday last week.
Pressure on the shilling is expected to continue over rising global crude oil prices on the back of supply constraints and geopolitical pressures.
According to Cytonn report, the shilling is expected to be supported by:
High Forex reserves are currently at Ksh.807.4 billion (USD 7.8 bn), equivalent to 4.7-months of import cover, which is above the statutory requirement of maintaining at least 4.0-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover.
It is also expected to be supported by improving diaspora remittances evidenced by a 23.5 percent year-to-year increase to Ksh.36.9 billion (USD 321.5 mn) as of February 2022, from Ksh.29.9 billion (USD 260.3 mn) recorded over the same period in 2021, which has continued to cushion the shilling against further depreciation.