Shilling depreciation will boost exporters

In Summary

• Commercial banks are now selling the shilling at 153 to the US dollar

• Depreciation hurts the urban consumer but helps exporters, tour operators and farmers.

A cashier at a Nairobi forex bureau counts dollars and shilling notes/
A cashier at a Nairobi forex bureau counts dollars and shilling notes/
Image: FILE

Banks are now selling the US dollar for around Sh153 and many analysts believe it will depreciate still further.

This is a sign of structural weakness in the Kenyan economy. The borrowing spree that took national debt from $12 billion in 2012 to $72 billion today has to be paid for.

Moreover, the new Central Bank Governor Kamau Thugge apparently believes, unlike his predecessor, that the shilling should float and find its natural level.

The decline in the value of the shilling is tough for the Kenyan consumer who will have to pay more for all imported items from maize and fuel to secondhand clothing.

But, as they say, it is an ill wind that blows no good. Farmers and exporters will be better off. Farmers sell their produce at around the world price which is now 50 percent higher because of the shilling's depreciation. Tour operators and exporters of vegetables, flowers, tea and coffee will now get more shillings and therefore higher profits.

This will be a period of adjustment for the Kenyan economy. The urban  consumer will suffer but farmers and exporters will benefit.

Quote of the day: "One word from Chairman Mao is worth ten thousand from others. His every statement is truth."

Lin Biao
The Chinese Marshal died in a plane crash on September 13, 1971

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