Kenya Shilling fifth worst performing in Africa - report

The Kenya Shilling is among worst performing currencies in Africa, having plunged heavily against major international currencies.

Latest analysis of Africa's currencies by UK based Azi Finance shows the shilling is fifth worst performing currency in the continent after Zimbabwe’s Dollar, the Sudanese Pound, Nigeria's Naira, and Egyptian Pound.

The shilling has shed almost 14 per cent in the past 12 months, leading to high investor flight from capital markets and high inflation as the dollar crisis persists. 

Yesterday, the shilling traded at a new low of 132.94.  

"We expect negative pressure to remain elevated towards mid 2023 for the Naira, Zimbabwe’s Dollar, the Sudanese Pound, Egyptian Pound and Kenyan Shilling,''Azi Finance says.

According to the report, Zimbabwe’s dollar is the world’s second worst performing currency after Venezuelan Boliver, plunging 521 per cent to 689 per dollar from 111.

It seems destined to fall further, with the country owing approximately $13 billion to international financial institutions and ineligible for additional lines of credit from the International Monetary Fund (IMF).

Sudanese Pound and South Sudanese Pound have maintained downward trends against the US dollar, Starling Pound and Euro, dropping at an average rate of 56 per cent in just a year.

This has seen the countries post the highest inflation rates in the region, hitting an average of 87 per cent in February.   

Last month, South Sudan’s government suspended the use of the US dollar and instead directed all transactions be done in the local currency, in a move feared could stifle economic activity in the war-ravaged economy.

Most transactions in the country are carried out using the US dollar, largely due to hyperinflation and the volatility of the local currency.

The fourth in the depreciating chart is Nigeria's Naira, which has lost almost a third of its value on the parallel market.

The apex bank in the country has since halted dollar sales in the parallel market, further reducing supply and contributing to the Naira’s weakness.

"Given the unwaning demand for dollars and reduced capacity for interventions in the parallel and official markets, we expect further currency depreciation over the months,'' the report reads in part. 

The Egyptian Pound opened the New Year with its biggest one-day depreciation since the October devaluation, losing 7.2 per cent to 26.49, from 24.75.

The decline continues a currency slump that wiped 57 per cent off the Pound’s dollar value in 2022 after Egypt’s Central Bank twice devalued the currency and allowed it to float more freely.

Devaluation was triggered by foreign investor outflows and higher import costs because of Russia’s war in Ukraine.

Now, a dollar shortage is causing backlogs at Egyptian ports, delaying the release of essential imports, including food, medicine, and manufacturing supplies, and adding to inflationary pressures.

"With economic conditions remaining unsteady and the country facing sizable external debt obligations this year, we expect the Pound to continue weakening through 2023 until fiscal reforms take effect and the economy stabilises,'' the report says.

Higher global fuel and food prices driving record inflation are a particular strain on government finances and consumer spending in sub-Saharan Africa, where for the vast majority of people, food accounts for over 40 per cent of spending.

According to the report, international capital exiting speculative assets, which caused the depreciation of currencies across the continent since 2020, shows little sign for now of a reversal.

"After a year in which Africa’s post-covid economic recovery was derailed by the combined effects of surging inflation, geopolitical instability, adverse weather and a looming risk of debt distress, the negative impact for currencies looks set to continue, “the report says. 

Even so, some regional currencies including Ghana’s embattled cedi, which has rebounded five per cent against the dollar.

In March as the government’s decision to suspend external debt payments eased demand for greenbacks in the local foreign exchange market.

"We expect a better year for the Rand, while Tanzania’s Shilling maintains its status among Africa’s steadiest currencies," the report says.