Kenyan Shilling Drops To Its Lowest in Almost Five Years
The Kenyan shilling has weakened against the dollar to a near five-year low amid concerns of decline in earnings of key exports such as tea and flowers.
On Tuesday, commercial banks quoted the shilling at 104.25/35 per dollar, compared with 104.05/15 at Monday’s close, this is the lowest level since October 2015, when it touched 104.40/50.
According to Churchill Ogutu, a senior research analyst at Genghis Capital, the decline in agricultural exports has put pressure on the shilling which is susceptible to the strengthening dollar.
“Exports have been muted while imports have been expanding and resulted in widening the trade gap if three of the top four forex earners are having a downturn it will exacerbate the deficit,” he said.
Another senior trader from a commercial bank noted that the reason for the weakening is liquidity-driven, “though we are now at the end of the month and increased end month dollar demand could also come into play,” he said.
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In its weekly report, Central Bank of Kenya (CBK) stated that the current account (CA) deficit narrowed to 4.2 percent of GDP in June from 5.4 percent recorded in 2018.
Kenya is among the world’s largest black tea exporter always battling up with India, China, Sri Lanka amongst other countries, the tea industry contributes around 4% of the country’s GDP and 26% of the country’s export earnings.
However, in the first quarter of 2019, the value of Kenyan tea exports fell Sh10 bn on account of depressed prices that affected earning.
Another key export seen to affect the shilling is the flower export which, according to the Kenya Flower Council, the earnings growth could slow down to 20% from 38% on global oversupply.
The Tourism sector is also facing a hurdle, the number of visitors to the country dropped to 921,090 in the first six months of 2019 compared with 927, 977 during the same period a year ago
Featured Image Courtesy: quartz.com
