Kenyan Shillings sink further deeper raising risks on the cost of debt servicing according to data from the Central bank.
Over the holiday season, the Kenyan shilling fell to trade at Sh123 against the US dollar, increasing the risk of Kenya’s debt servicing costs.
According to data from the Central Bank, the exchange rate for the dollar is currently Sh123.33, up from Sh122 at the start of December last year.
“The Kenya Shilling remained stable against major international and regional currencies during the week ending December 29. It exchanged at Sh123.33 per US dollar on December 29, compared to Sh123.16 per US dollar on December 22,” Central bank of Kenya (CBK) said in its latest weekly publication.
Kenya’s foreign exchange reserves, however, increased to 4.17 months of import coverage in December from 3.9 months in early December as a result of a deal with the International Monetary Fund (IMF) that provided the National Treasury with approximately Sh50 billion in funding.
“The usable foreign exchange reserves remained adequate at $7.44 billion (4.17 months of import cover) as at December 29. This meets the CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover,” said CBK.
The exchange rate losses, however, mean well for exporters who will reap higher gains from their sales in foreign currency.
Importer demand is expected to set in this month after a lull in the holidays season in what could add more pressure on the currency.
Due to lower food prices from favorable rainfall and falling edible oil prices internationally, overall inflation decreased further to 9.1% in December 2022 from 9.5% in November.
From 15.4% in November, food inflation dropped to 13.8% in December. Inflation for fuel decreased from 13.8 to 12.7% in November.