Kenya Shilling Weakness Effect

The Kenya Shilling is the most volatile currency in the world, as well as the worst performing one. Just a month ago our local unit reached a record low of 107 to the greenback. Sometime in 2008 it was USD/KES 61, a 75% depreciation, surely something went wrong. Everyone is affected, some positively but the majority are negatively affected by this steep decline in value of our local unit.

Importers

Importers are feeling the heat by buying the USD at a very high rate than 2, 3 years ago and most of them are adjusting their prices accordingly. Kenya is a net-importer of goods, we import almost 10 times what we export and it is very unsustainable. Our petroleum import bill is larger than our whole export receipts and that is why the Kenya shilling is losing value fast. Our current account/GDP is the same as Greece so need a change of game plan. Oil importers have revised their prices upwards as well as food importers and infrastructure material dealers.

Exporters

Some economists say that exporters are benefitting from the weak KES but I beg to differ. What do we export? Tea, coffee, tourism right, but all these require inputs that are not locally available and have to be imported like fertilizers, equipment e.t.c. There is also the issue of inflation, people who are paid with USD may have some advantage but the way prices are going high, the difference is negligible.

Consumers

Mwanainchi wa kawaida is one who is suffering most by this depreciation that is fueling higher inflation and exporting jobs to China. Furthermore, public debt is also increasing meaning that the government may have to increase taxes which will cause further rise in general prices of goods and services, making it hard to survive for the average/low-income household.

Tourists

They are the biggest winners since their cash can buy more goods and services than they 3 years ago and a cheap holiday is what everyone is looking for in these tough times.

 

 

 

 

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One thought on “Kenya Shilling Weakness Effect

  1. Thanks for the post. I agree with you that the Kenyan currency has been volatile especially considering that the dollar has also weakened. However, I don’t think that it has been the weakest of all the world currencies. Well, the Zim Dollar is a case study in this regard. All in all, the common line is that the KES has weakened and there should be measures in place to ensure that the counter-effects don’t hurt the common mwananchi vibaya. However, knowing the government operatives and the treasury mandarins, this is a long shot. We’ll continue experiencing more hard times and industrial action.

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