Emmanuel OchayiThe Kenyan shilling, battling multiple economic headwinds, reached an unprecedented low of 150 shillings to the US dollar on Monday, exacerbating the financial woes of Kenyan citizens grappling with soaring inflation and new taxes.
The shilling has been on a sustained decline for several years, witnessing a steep drop of almost 24 per cent over the past year. Factors contributing to this freefall include mounting debt levels and dwindling government revenues.
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Ken Gichinga, the Chief Economist at Mentoria Economics, explained that, “The exchange rate reflects the dollar’s strength amid the Middle East crisis, which is driving investors towards safe-haven assets. Additionally, high US treasury yields have also played a role.”
The Central Bank of Kenya’s data revealed the dollar trading at just over 150 shillings, though in recent weeks, some commercial banks and foreign exchange bureaus have traded it at even higher rates.
Kenya’s debt burden has surged, reaching over 10.1 trillion shillings ($67 billion) by June’s end, equivalent to approximately two-thirds of the nation’s Gross Domestic Product.
Servicing this debt, largely owed to China, has become expensive as the Kenyan currency continues its decline. The government also faces a $2 billion eurobond maturing in June next year.
Earlier this year, President William Ruto introduced a range of new and higher taxes to replenish the government’s finances, despite previous campaign promises to alleviate the financial hardships of ordinary Kenyans.
In 2022, Kenya’s economic growth slowed to 4.8 percent from 7.6 percent in 2021, affected by global repercussions stemming from Russia’s invasion of Ukraine and a devastating regional drought that severely impacted the country’s agriculture Inflation remains a persistent challenge, with a 6.8 percent annual rate in September, as food and fuel prices continue to rise, further squeezing the budgets of Kenyan households.
These economic challenges are putting immense pressure on the Kenyan population, making the recovery of the nation’s currency and economy a critical issue for the government and policymakers.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
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