How The Weak Kenya Shilling is Affecting Agriculture

The Kenyan Shilling is the worst performing currency in the world, shedding off over 22% year to date. This has been largely caused by a huge negative balance of trade and of course the usual speculators in the market who are short selling the shilling. Kenya is a net importer of goods hence the trade deficit and given the surge in crude oil prices, I believe we are yet to see the worst.

Weak Kenya Shilling

Some economists say that the weak KES is benefitting the farmers and some exporters but they are not reading in between the lines. Yes, tea, coffee horticulture are fetching good prices due to the exchange rate but if you analyze it well, you’ll see there is no substantial gain whatsoever. Most of the farming inputs in Kenya are imported; the digging hoe from China, the hybrid seed from Germany, chemical fertilizer from Russia, the pick up truck from Japan.  One may argue that the currency has weakened more than how the rate of inflation has increased, hence a net benefit but we have to remember that they recently changed how inflation is being calculated so that it does not look so bad.

The volatility and weakness of the Kenya shilling is very destructive to agriculture and any other business that involves global trade. It is bad for planning and especially financing because Kenya borrows a lot of money from the IMF, world bank and what not; meaning we borrowed at KES/USD 80 and are now repaying at KES/USD 106 – It’s absurd.

WHAT SHOULD BE DONE

We should boost our exports, simple. This stone throwing at the CBK governor will only make the situation worse.

We should invest heavily in agriculture, tourism, services, stuff that actually earns us some foreign exchange but the most important is agriculture.

We are importing almost 60% of our food which has driven inflation high 12 months consecutively. Not to mention the oil we import and infrastructure goods. Our Current account/GDP is at -8.5 v -7.8 same time last year. This is very bad for the economy and our exchange rate and the only way to come out of this hole is to invest in our export sectors, creating jobs as an outcome and food security.

What do you think should be done to improve our exports? Please share on the comments section below…

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One thought on “How The Weak Kenya Shilling is Affecting Agriculture

  1. Pingback: Interest Rate Hikes and Agriculture | The Young Agropreneur

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