The relentless depreciation of the Kenyan shilling is causing concern among importers and businessmen who are experiencing firsthand the pain of a dollar shortage which has seen them parting ways of as much as Ksh120 per dollar versus the quoted rate of Ksh116 .
The Kenya Association of Manufacturers on May 30 expressed concern about dollar shortages, claiming that members who rely primarily on imported commodities do not have access to dollars at official market rates.
Rising inflation has already started driving up the cost of living, and the devaluation of the currency is only compounding the pain as manufacturers complain of rising production costs due to the ongoing dollar shortage.
Im Over the past year the shilling has fallen by $0.0007 from around $0.0093 to $0.0086, meaning that what Kenyans could previously buy for $100 now costs at least $8 more, without accounting for inflation.
During the same period, other currencies in the region have remained relatively stable, depreciating by only a small margin, despite most of the shocks accompanying currency devaluation, such as Covid-19 and the Ukraine crisis, overlapped.
The Ugandan shilling lost $0.00002, the Tanzanian shilling lost $0.00001, while the Rwandan franc is up 0, $00003 down.
Kenyan economist Kwame Owino told The EastAfrican that the shilling’s higher depreciation rate could be due to internal policies and regulations restricting the interbank foreign exchange market.
“The lack of clarity in price signals from Kenya’s interbank foreign exchange market and the growing negative trade balance are the biggest possible factors behind the high rate of depreciation,” said Owino.
Although Kenya’s With foreign exchange reserves well in excess of the country’s and East African Community’s legal requirements, the dollar shortage issue is troubling given that Malawi recently devalued its currency by 25 percent to deal with a similar problem.
< p >The Governor of the Central Bank of Kenya, Dr. Patrick Njoroge, has since dismissed claims of dollar shortages, stating that although demand for dollars increased about two months ago, the situation has normalized.