The Kenya shilling on Monday dropped to a low of 107.25 against the dollar due to high demand by importers amid depreciating forex reserves.
The local currency which was in February rated as the most stable in the continent by Renaissance Capital has been losing ground against major currencies as tourism, diaspora remittance and agricultural export receipts drop due to coronavirus aftermath.
Last week the Shilling remained relatively stable against major international and regional currencies, exchanging at 105.91 per US dollar on April 16 compared to 106 the previous week.
Today's drop of almost two per cent is the highest since the shilling started slowing mid-February.
The drop in the forex reserve continues to exert pressure on the shilling which continues to depreciate against the US dollar, pushing up import costs, flaring up the general cost living for consumers as traders pass down the high import bill.
According to Central Bank of Kenya, the country’s reserve sunk further to Sh791.3 billion last week compared to Sh797.4 billion the previous week, and almost Sh100 billion lower since early March.
Forex reserves fell by $61 million in the week ended April 16. They now stand at $7.913 billion (4.78 months import cover). This is just above the EAC convergence criterion of 4.5 months import cover & CBK's statutory requirement of 4 months import cover,’’ CBK said.
“Every day we have more cases of coronavirus so business, as usual, will not resume. Offshore inflows are not coming in for investments, yet dollar demand is still there,'' a banking official told Reuters last week.
