The Kenya shilling has slipped to 123 to the US dollar with predictions that it could reach 130 to the dollar. This will raise inflation and the cost of imported consumer products but it is all for the best.
Kenya is running a substantial balance of payments deficit as our imports (Sh2.15 trillion) are less than our exports (Sh744 billion) although this is compensated to some extent by diaspora remittances and tourism which bring in substantial amounts of forex.
The Central Bank has intervened to protect the shilling in the last few years but it has still declined from around 100 to now 123 to the dollar. This depreciation is unavoidable given Kenya's relative economic weakness.
But it is not a disaster. Exports will become more profitable and imports more expensive. Over the long run, exports should increase and imports decrease, thereby reducing the balance of payments deficit.
The important thing is that Kenya should avoid instability in the currency market. We need a stable shilling for forward planning. If the shilling depreciates, it should happen slowly and steadily, not violently.
Quote of the day: "First they came for the socialists, and I did not speak out—because I was not a socialist.Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist. Then they came for the Jews, and I did not speak out—because I was not a Jew. Then they came for me—and there was no one left to speak for me."
Martin Niemöller
The German pastor was born on January 14, 1892
