Saturday, June 3, 2023

Shilling sinks to 138 against US dollar. Government clueless on solution

The Kenya shilling has fallen to a new official low of 138 against the US dollar. The fall comes weeks after a failed promise by President William Ruto that the shilling would make gains and go to highs of 115 to 120 against the US dollar.

The fall of the shilling has been unabated, leaving Kenyans wondering on whether the government is clueless and helpless on measures that can redeem it.

At the beginning of the year, the Kenya shilling was going at Sh. 123 against the US dollar. Less than two months later, the local currency fell to Sh. 126 against the US dollar.

The depreciating shilling has been having a huge impact on the economy and Kenya’s debt obligations.

“A 10 percent depreciation of the Kenya shilling to the dollar would increase revenues and expenditures by Sh. 20.3 billion and Sh. 2.8 billion respectively in FY 2023/24 thereby reducing the projected fiscal deficit by Sh. 17.5 billion,” the Budget Policy Statement from the National Treasury shows.

Every time the shilling depreciates by one shilling to the dollar, Kenya’s external debt rises by Sh. 37 billion. This means that Kenya’s external debt servicing burden is going up by nearly Sh. 37 billion every month due to the shilling’s fall.

Landlords demanding rent in US dollars as shilling loses value helplessly

Alarmingly, though, the government has remained silent on the matter, raising concerns on whether the fall of the local currency is being manipulated by the government. This follows a pattern in which the shilling is losing close to one shilling against the dollar every two weeks to one month.

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