Kenya shilling hits Ksh.140 mark against U.S dollar

The weakening Kenyan shilling, currently at 140 to the U.S dollar, continues to pile pressure on the cost of living in the country with commodity prices expected to hit a record high because Kenya is an importing nation.

Economists however worry that the shilling could weaken even further with many expecting it to hit Ksh.150 to the U.S dollar in the coming months.

They have also asked businesses to tighten their belts as the situation could continue to worsen in the next 24 months.

Over the last 12 months, the shilling has shed about 10% of its value to the dollar, this pushing the rate of inflation in the country to a high of 9.1% in December.

Kenya, being a net importer of products, relies on foreign currency to make purchases and this puts extra pressure on CBK reserves. Sector experts say that the situation will get worse before getting better.

Alpesh Vadher, the CEO of PKF East Africa, said: “The U.S dollar is a global currency and its always in demand because of its value for trading purpose, this is going to dictate the strength of the Kenyan shilling and looking at our deficit we need more dollars than are currently available in the market.”

According to Alpesh, the situation is expected to remain unchanged for the next 18-24 months mainly because of the mechanisms put in place by the U.S government including raising the interest rates of the US federal reserve that has strengthened the currency.

“The next 18-24 months are going to be difficult. The rate is 140 today and we could get to June and the rate is 150...we don’t know...so looking at what the U.S has done to strengthen the dollar, we have to do the same to ensure that the shilling is not weak,” stated Alpesh.

The rates have fluctuated between Ksh.140 and Ksh.145 in currency bureaus over the last one week, with the CBK rate at Ksh.129.89.

Over the last six months tracking the movement of the dollar, it peaked at its highest at Ksh.125.77 on February 5, with the lowest exchange rate in the last 6 months being in August last year when the exchange rate was Ksh.119.37 with an average rate of Ksh.122.02 over a six-month period according to data from the Central Bank.

This trend has affected many sectors including the price of vehicles in the country.

According to Edward Gachani, an auto dealer and CEO of Motorhub, vehicle prices have gone up.

The continued depreciation of the shilling is expected to push up the cost of living in the country as Kenya’s economy is import dependent.

Kenya's main imports include fuel products, machinery, medicine, vegetable oil, pharmaceuticals, cars, wheat, and clothing, all bought using the U.S dollar.

This means that traders who import the goods will spend more to acquire them and thus pass on the cost to the consumers.

The dollar strengthened dramatically in 2022 as a result of the U.S federal reserve increasing interest rates in an effort to counter increased inflation.