EAC Regional bloc currencies are performing much better than the Kenya shilling which has lost 20% of its value according to Central Bank of Kenya (CBK) data.
CBK details indicate that the Kenyan shilling is now priced at about 19.7% lower than the Uganda shilling when compared with mid-July last year while its value against the Tanzania shilling and Rwandese franc has also dropped by 12.1% and 4.4% respectively in the same period.
The collapse in value ultimately causes pain to regional traders importing goods from Uganda and Tanzania. This means Kenyan exports into the region are fetching far much less than before.
“Importing goods in the region is becoming difficult for business. Many of us have had to cut on the volume of goods we are importing or have had to increase money to get the same volume of goods we used to get say a year earlier,” said Kenya’s Samuel Karanja, the chief executive at Importers and Small Scale Traders Association.
“And since selling prices for these goods are not changing that much here in Kenya, our profit margins have been dropping. We are worried that reversing this free fall of the shilling is going to be difficult.”
CBK data showed that one Kenyan shilling was averaging USh25.80, Tsh17.30 and Rwf8.30 at the start of trading last Friday.
When compared with March 2020 when the Covid-19 disruption set in, the Ugandan currency has gained about 29.5% against the Kenya shilling.
Tanzanian shilling and Rwandan franc have gained 24.1% and 10.7% against the Kenyan currency in this period.
The declining value of the Kenyan currency against that of its neighbours’ mirrors the performance of the shilling against the world’s major currencies, including the US dollar and the sterling pound.
The Kenya shilling has shed 19.5% against the dollar since mid-July last year and 32.1% against the sterling pound over the same period.
The weakened Kenyan shilling against the dollar has set the country up for increased costs of servicing its dollar-denominated loans and also exposed it to a higher import cost.