More pain as Shilling value falls 0.4% against US Dollar

Debt Service cost to put more pressure on the Shilling

The Kenya Shilling depreciated by 0.4% against the US dollar to close the week at Ksh.144.2 from Ksh.143.6 recorded the previous week.

On a year-to-date basis, the shilling has depreciated by 16.8 percent against the dollar, adding to the 9.0 percent depreciation recorded in 2022.

More pressure on the shilling is expected due to an ever-present current account deficit, which came at 2.3% of GDP in Q1’2023 from 4.2% recorded in a similar period last year.

The shilling is also expected to suffer more due to the need for government debt servicing which continues to put pressure on forex reserves given that 66.8 percent of Kenya’s external debt that is US Dollar denominated as of April 2023 will pile more pressure on the Kenyan shilling.

The shilling is however expected to be supported by diaspora remittances standing at a cumulative USD 2,411.9 million in 2023 as of July 2023, 2.0% higher than the USD 2,364.0 million recorded over the same period in 2022, and the tourism inflow receipts which came in at Kshs 268.1 billion in 2022, a significant 82.9% increase from Ksh.146.5 billion inflow receipts recorded in 2021.

Adequate forex reserves currently at USD 7.3 billion (equivalent to 4.0-months of import cover), which is within the statutory requirement of maintaining at least 4.0-months of import cover will also support the Shilling

Lawrence Baraza

Lawrence Baraza is a prolific writer with competencies in Digital Media, Print, and Broadcast. Baraza is also a Communication Practitioner currently spearheading Digital content on Metropol TV's Digital Desk.

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