In a concerning economic development, Kenya’s currency plummeted to an unprecedented low of 150 shillings against the US dollar on Monday, as reported by the country’s central bank. This alarming depreciation exacerbates the economic challenges faced by the heavily indebted East African nation, already grappling with inflation.
Over the past year, the Kenyan shilling has steadily lost ground, experiencing a significant devaluation of nearly 24% against the robust US dollar. The Central Bank of Kenya confirmed that on Monday, the dollar was trading at 150 shillings, a rate that some commercial banks and foreign exchange bureaus had already reached in previous weeks, if not surpassed.
Chief Economist at research firm Mentoria Economics, Ken Gichinga, attributed this decline primarily to the strengthening of the US dollar. The recent crisis in the Middle East has driven investors towards safe havens, and the high yields on US Treasury bonds have further bolstered the US currency, putting pressure on emerging market currencies like the Kenyan shilling.
This devaluation carries significant implications for Kenya’s economy. The rising cost of imports due to the weakened shilling adds to the economic strain. Moreover, the country’s debt burden, which stood at a staggering 10,100 billion shillings (approximately 64.4 billion euros) at the end of June, equivalent to about two-thirds of the gross domestic product, is becoming increasingly burdensome.
Of particular concern is the mounting challenge of repaying this debt, especially to major lenders like China. With debt repayment obligations looming, the government faces heightened financial pressure. The situation underscores the urgent need for prudent economic strategies to stabilize the currency and strengthen the nation’s economic resilience in the face of these challenging times.
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