Kenya’s shilling hit a new low against the US dollar, defying central-bank measures to stabilize it.
The currency, which has been in a decline mode for the past 16 months hovered towards 120 units to the globally buoyant dollar after sinking to 119.85 as markets opened on Thursday.
This comes as uncertainties continue around the next head of government after nine petitions were filed at the Supreme court challenging Presidential-elect William Ruto's victory.
The court is expected to render a verdict by September 5, bringing some normalcy to the economic space.
The shilling has also been dropping on the back of a fast-rising import bill that has outstripped earnings from exports, diaspora remittances and tourist receipts.
Diaspora inflows dropped to a 13-month low of $319.4 million (Sh38 billion) in July attributed to the high cost of living globally.
Although the Central Bank of Kenya did not give reasons for the persistent drop, reports by JP Morgan show diaspora remittances have dropped in recent days due to rising expenditure on basic needs, leaving less to dispose of.
The shilling has also weakened to a record low against the dollar, pressured by higher demand for the US currency by importers of petroleum products and other items such as industrial supplies.
A depreciating shilling means importers spend more to bring in goods such as raw materials for factories, raising input costs for firms that usually pass much of the additional expenses to consumers.
On the other hand, exporters of tea, horticulture and coffee who are largely paid in dollars, however, benefit from a weakening Kenyan currency as they end up earning more.
The shilling has depreciated 1.47 percent since the beginning of the year, with analysts noting the fast decline in months to the August polls and runaway oil prices.
Apart from the last-minute rush to stock foreign currencies, analysts blame the election-induced high supply of local currency in the market to the weakening of the shilling.
Since the onset of the electoral process, market investors have been scrutinizing fiscal accounts, the balance of payments and central bank reserves.
Having a current account deficit as well as a fiscal deficit, Kenya's financial position as a commercial hub for East and Central Africa, has been a longstanding source of vulnerability.
Its stocks, bonds and shilling currency are some of the most traded by foreign investors on the continent.
In its weekly bulletin, the Central Bank of Kenya said foreign-exchange reserves dropped to 4.43 of import cover, almost breaching the East Africa benchmark.
Reserves dropped to $7,682 billion or Sh917,230,800 billion from $7.8 billion or Sh928.2 billion the previous week.
