On Monday, the Kenyan shilling plummeted to a historic low of 150 against the US dollar, compounding the difficulties faced by a population already grappling with soaring inflation and the introduction of several new taxes.
The Kenyan shilling has been on a downward trajectory for a number of years and experienced a nearly 24 percent depreciation in the last year.
As per data from the Central Bank of Kenya, the US dollar was being exchanged for slightly over 150 Kenyan shillings. However, certain commercial banks and foreign exchange bureaus have been trading it at that rate or even higher in recent weeks.
Ken Gichinga, the chief economist at Mentoria Economics, informed AFP that the exchange rate is a result of the dollar’s appreciation amidst the Middle East crisis, which has prompted investors to turn to safe-haven assets. Additionally, high US treasury yields are contributing to this exchange rate trend.
By the end of June, Kenya had amassed over 10.1 trillion Kenyan shillings (equivalent to $67 billion) in debt, as reported by Treasury figures. This debt accounts for roughly two-thirds of the country’s gross domestic product.
The expense of servicing the debt, predominantly to China, has surged due to the depreciation of Kenya’s currency. Furthermore, the government has a $2 billion eurobond maturing in June of the next year.
Earlier this year, President William Ruto introduced a series of new and augmented taxes to bolster government revenues, despite making promises during the previous year’s election campaign to alleviate the financial burdens on ordinary Kenyan citizens.
Economic growth decelerated last year to 4.8 percent, down from the 7.6 percent recorded in 2021. This slowdown was influenced by the global repercussions of Russia’s invasion of Ukraine and a severe regional drought that had a detrimental impact on Kenya’s crucial agriculture sector.
Inflation has persevered at elevated levels, registering an annual rate of 6.8 percent in September, with the costs of food and fuel continuing to escalate.
