Kenya’s currency has reached an unprecedented low, with the exchange rate hitting 150 shillings to the US dollar, according to data from the central bank. This significant depreciation of the Kenyan shilling, losing nearly 24% of its value against the dollar in the past year, is a concerning economic development for the East African nation, already grappling with high inflation.
The Central Bank of Kenya reported a rate of 150 shillings to the dollar, which some commercial banks and bureaux de change had already reached or surpassed in recent weeks. The decline can be attributed to multiple factors, with Ken Gichinga, the chief economist at research firm Mentoria Economics, emphasizing the influence of the strengthening US dollar. This strengthening is in response to recent turmoil in the Middle East, driving investors toward safer assets and the attractive yields offered by US Treasury bonds.
The ongoing depreciation of the Kenyan shilling has implications beyond exchange rates. It makes imports more expensive, contributing to Kenya’s growing debt burden, which exceeded 10,100 billion shillings (equivalent to 64.4 billion euros) by the end of June, representing around two-thirds of the country’s gross domestic product.
The increasing debt poses challenges for the Kenyan government, particularly in repaying loans, including obligations to China, which is becoming more costly. The situation adds pressure as the government faces upcoming debt repayments starting in July.