- Shilling reached all-time low of 126.21 per dollar on Tuesday
- Increased demand for dollars has outstripped current supply
According to Bloomberg article published on February 21, 2023, Kenya’s shilling is hitting fresh record lows every day and the currency is seen depreciating further as the East African nation’s terms of trade weaken.
The currency fell to more than 126 per dollar for the first time on Tuesday, taking its losses since the start of the year to over 2%. It has slid for 41 straight days, the longest losing streak since 1988, according to data compiled by Bloomberg.
“With the current state of the domestic economy and with the state of the global economy it can only depreciate further,” said Reginald Kadzutu, a Nairobi-based economist. “The terms of trade are not improving.”
Increased demand for dollars has outstripped the current supply of the foreign currency, he said. The shilling is projected to settle at 130 per dollar in the event the government implements fiscal consolidation and could depreciate beyond that in the event there is fiscal expansion, Kadzutu said.
Kenya’s weekly foreign-exchange reserves fell to $6.88 billion on Feb. 16, according to data published by the Central Bank of Kenya. The reserves are only sufficient to cover 3.8 months of imports, down from 3.9 in the previous week.
Kenya, the world’s largest black tea exporter, is suffering from a drop in prices. These fell to $2.10 per kilogram at a Feb. 6-8 sale in the nation’s port city of Mombasa, compared with $2.25 a kilogram at the first weekly auction this year.
