•CBK on Monday quoted the shilling at an average 140.04, meaning importers and local traders will be paying more to secure the currency to pay for deliveries.
•The Kenya Association of Manufacturers has remained firm on cost implications in production, saying industries have no option but to pass extra costs to consumers.
Image: FILE
Kenya households are staring at a significant rise in the cost of living as the shilling hit a new low of 140 units to the dollar.
Analysts predict the local currency could trade at Sh150 to the US dollar by December.
Central Bank of Kenya on Monday quoted the shilling at an average 140.04, meaning importers and local traders will be paying more to secure the currency to pay for deliveries.
Last month, the shilling was averaged Sh138 with local commercial banks selling the dollar at above 142, meaning current market prices could go as high as 145 to a dollar.
Kenya remains a net importer with a widening trade deficit, which hit Sh1.62 trillion last year, the Economic Survey 2023 indicates.
The country’s import bill rose by 17.5 per cent to Sh2.5 trillion against Sh873.1 billion in export earnings.
Data analyst and financial expert Mihr Thakar yesterday however said the shilling has continued to find its market-driven exchange value, which means that its on its way to stabilisation in the current tight dollar environment.
“Stabilisation of the Kenya Shilling will boost investment into Kenya and return of liquidity by less stringent monetary policy in the developed world could also lead to the local units strengthening,” Thakar told the Star.
The shilling is expected to remain weak with projections of further drops in the medium-term amid persistent forex demand from importers, as well as the impact of rising inflation, according to trading solutions provider – AZA Finance.
“We expect the shilling to continue depreciating in the near term,” said Terry Karanja, senior treasury associate at AZA Finance.
Renaissance Capital has also projected a further slide on the shilling.
"The dollar is expected to continue with its charm offensive in the coming months, a move likely to further hurt weak currencies,'' the financial service advisory firm said.
The weak shilling is among a major concern by CEOs in the country, a CBK survey in May indicates, alongside proposed tax increases in the Finance Bill and reduced liquidity in the market.
These, the surveyed captains of industry indicated could derail growth in the private sector.
Coupled with increases in fuel prices, they are seen as a major contribution to the cost of doing business in the country; at a time households are struggling with reduced disposable income hence lower purchasing power.
Analysts at Absa Bank have projected the shilling could hit a low of 150 by December, despite the slight ease in global economic constraints.
According to Jeff Gable, the head of FICC Research and chief economist for Absa, the local currency was projected sometime last year to continue weakening to a better part this year, on the back of hiked interest rates by global lenders in efforts to curb inflation.
"The trend will keep on for the rest of this year," Gable said.
The Kenya Association of Manufacturers has remained firm on cost implications in production, saying industries have no option but to pass extra costs to consumers.