The depreciation trend of the Kenyan shilling against the dollar is worrying. Since the start of this year, the shilling has been weakening thanks to growing demand of the US currency initiated by importers and oil companies.
Today, the dollar demand is higher than the supply with the Kenyan shilling hitting a historic low of Sh124, an indication that the demand will continue placing the Kenyan shilling under pressure as key export earners experience reduced dollar inflows.
People who import petroleum products, motor vehicles, pharmaceuticals, machinery, medicine, wheat, and clothing should be worried about the weakening shilling – importers will have to dig deeper into their pockets in order to acquire the same quantity of goods they would have acquired for less, last year, and will eventually pass on the burden to customers.
The continuous weakening of the shilling will also push up the cost of living as the country is heavily dependent on imports. It is interesting that the depreciating trend comes after remittances to Kenya in 2022 hit a record high of ShSh497.1 billion from Sh458.9 billion sent in 2021 despite the impact of the global challenges such as the Russia-Ukraine war, according to the Central Bank of Kenya.
National Treasury Cabinet Secretary (CS) Njuguna Ndung’u stated during the opening of the public sector hearings for the fiscal year 2023/24 and the medium-term budget, that government ministries should implement austerity measures, including the suspension of fresh construction initiatives, to be able to limit the impact of the weak shilling.
The Treasury CS reiterated that the over Sh900 billion rising wage bill is already bad news – and, with Kenya’s inflation at 9.1% as at December 2022, the nation’s current economic predicament, and the depreciation of the shilling, will most likely reach unfathomable heights if not nipped in the bud.
He said the Treasury may also stop expenditures in some recurrent areas such as domestic and foreign travels, communication, printing, training, hospitality, fuel, purchase of furniture, purchase of motor vehicles, refurbishments and routine maintenance in a bid to achieve fiscal consolidation.
“From all the things we have analyzed, 2023 is not looking good, there are clear signals that it is going to be tough year, and that the global economy is one example in terms of where we are going,” said Ndung’u.
