{Photo courtesy of Africanews}
By Samuel Owino
On Monday, 23 October, the Kenyan shilling hit an all-time low, trading at 150 shillings for one dollar amid an inflation rise in the country.
The drop in value of the shilling is mounting pressure on the forex reserves that stood at $6.8 billion as of October 19, which covers a total of 3.7 months’ worth of imports. This is a fall from $7 billion a year ago that covered 5.5 months’ worth of imports.
This comes as a concern to Kenyan citizens, as the government seems to not comment on the rapid decline of the shilling’s value. It is exactly the opposite of what president Ruto promised during the campaigns last year August.
The CBK governor, Kamau Thugge, has come out to defend the shilling during an appearance before National Assembly Finance committee led by Molo MP, Hon. Kuria Kimani. Thugge says that the shilling has been overvalued for over six years, since former president, Uhuru Kenyatta’s reign.
“So at one point, we had reserves of 5.5 months of import cover now we have currently we have 3.7 months on the import cover is still sufficient to address any emergencies but there has been that decline in the level of reserves to try to defend perhaps overvalued exchange rate,” Thugge said on Tuesday.
The Central Bank, in its latest financial report released on Oct. 15, blamed the decline of the shilling on the “rapid monetary policy tightening in advanced economies that pushed global interest rates sky-high, triggering the flight of investors to quality currencies like the dollars.”
The Central Bank however has its hopes up that recovery in exports, resolution of Russian-Ukraine conflict, pausing of global monetary policy tightening, rise in diaspora remittances, prudent monetary policy and stable import bill are expected to support the shilling to regain value and stability.
The president in April 2023, had promised that in a few months, the value of the shilling would rise against the dollar. Times show that it is not the case and the drop in value has made other regional currencies like Uganda and Tanzania gain value by as much as 10 shillings.