The Kenyan shilling has reached a historic low, plummeting to 150 shillings to the dollar, adding to the economic woes of Kenyan citizens who are already grappling with high inflation and an array of new taxes.
This economic turmoil is the result of several years of currency depreciation, with the shilling losing nearly 24 percent of its value over the past year, primarily due to mounting debt levels and dwindling government revenues.
Data from the Central Bank of Kenya confirms that the exchange rate now stands at slightly over 150 shillings for a single US dollar. However, some commercial banks and foreign exchange bureaux have been trading the dollar at this rate or even higher in recent weeks.
Ken Gichinga, the Chief Economist at Mentoria Economics, pointed out that the exchange rate’s decline is influenced by various factors, including the dollar’s strengthening amidst the Middle East crisis, which is compelling investors to seek refuge in safe-haven assets. Additionally, high US treasury yields are also contributing to the Kenyan shilling’s struggles.
Kenya’s financial situation has been further exacerbated by the staggering national debt, which reached over 10.1 trillion shillings (equivalent to $67 billion) by the end of June, as reported by the Treasury.
This accounts for roughly two-thirds of the country’s gross domestic product (GDP). Servicing this debt, particularly to China, has become increasingly burdensome as the shilling’s value continues to deteriorate. To compound matters, the government is also faced with a $2 billion eurobond that is set to mature in June of the following year.
Earlier in the year, President William Ruto introduced a series of new and higher taxes to replenish the government’s coffers, despite promises made during last year’s election campaign to alleviate the financial hardships faced by ordinary Kenyans.
Kenya’s economic growth suffered a significant setback last year, slowing to 4.8 percent from the previous year’s 7.6 percent, primarily due to global repercussions from Russia’s invasion of Ukraine and a devastating regional drought that severely impacted the vital agricultural sector.
Inflation remains persistently high, with an annual rate of 6.8 percent as of September, driven by the continued rise in food and fuel prices.
This dire economic situation has raised concerns about the well-being of Kenyan citizens and the stability of the country’s financial landscape, necessitating immediate attention and action to address the root causes of this economic downturn.
© Agence France-Presse
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