The Kenyan shilling hit a record low Monday against US Dollar to exchange at Ksh.114.7 against US Dollar, with only 0.25 units remaining to hit 115 level against the dollar.
The shilling hit a 14-month all-time low to 114 units against the US dollar on March 8, signaling a looming crisis in commodity prices.
This has been fueled by the economic fallout over the continued war between Ukraine and Russia, with the latter being the second-largest producer of crude oil globally.
This is the lowest the Kenyan shilling has ever depreciated against the dollar.
On a year-to-date basis, the shilling has depreciated by 1.4 percent against the dollar, in comparison to the 3.6 percent depreciation recorded in 2021.
Pressure on the shilling will continue on the rising global crude oil prices on the back of supply constraints and geopolitical pressures at a time when demand is picking up with the easing of COVID-19 restrictions and as economies reopen.
The increased demand from merchandise traders as they beef up their hard currency positions in anticipation of more trading partners reopening their economies globally will also pile pressure on the local currency.
According to Cytonn report, the ever-present current account deficit due to an imbalance between imports and exports, with Kenya’s current account deficit estimated to come in at 5.6 percent of Gross Domestic Product (GDP) in the 12 months to February 2022 compared to the 4.3 percent for a similar period in 2021.
The wider deficit reflects a higher import bill, particularly for oil, which more than offset increased receipts from agricultural and services exports, and remittances.
