Kenya’s Currency Hits Record Low On Increased Dollar Demand

Remittance inflows continue to provide a stable source of foreign exchange for Kenya and key support for many households

Dr Patrick Njoroge, CBK Governor Displaying some of the new currency Notes

Kenya’s currency, the shilling, hit a new record low against the U.S. dollar on Tuesday on the back of rising demand for dollars.

The shilling slumped to an all-time low of between 107.5000 – 107.9400 against the dollar according to data from Bloomberg.

Data published by Central Bank of Kenya says the shilling is however expected to be supported by the current high levels of forex reserves, currently at USD 9,699 million (5.87 months of import cover) as at July 16.

However, the current reserves have been declining compared with the previous  $9.7 billion.

Earlier this week, Cytonn Investments said that the Kenyan shilling depreciated by 5.1 percent against the US Dollar during the first half of 2020. “Despite this, we expect the shilling to be supported by the CBK’s sufficient reserves, currently at USD 9.7 bn (equivalent to 5.8 months of import cover), above the statutory requirement of 4.5 months import cover.”

Kenya’s debt has soared to 6.65 trillion shillings by May 20 from 6.44 trillion shillings a month ago, external debt hit  3.5 trillion shillings from 3.32 trillion shillings.

“As the government leads the fight against the coronavirus, its constrained coffers amid dwindling revenues, has elevated its borrowing appetite.

The government’s preference has so far leaned towards domestic debt financing given unfavorable pricing in international debt markets. However, owing to the crisis, the government has managed to secure concessional debt financing from various bilateral and development partners to the tune of around KES 220.00Billion,” says NCBA Market Research.

The CBK’s next meeting of the Monetary Policy Committee (MPC) will be held on July 29.