KENYA SHILLING SLIDES AGANIST MAJOR CURRENCIES

By John Harrington Ndeta,
AjabuAfrica.com

NAIROBI,Kenya-The Kenya Shilling has lost ground against major world currencies in the last one week to unimaginable levels. For the first time in four years, the US dollar was exchanging at Ksh 80.05 buying and 80.19 selling early Friday.

This is in spite of assurance from the acting finance Minister John Michuki and the Central bank of Kenya that the tumble in the Kenyan Market was short lived and would not worsen. This has been attributed to high demand for dollars occasioned by what the finance Minister called a miscalculation of a local bank which won a Government contract to supply dollars for the importation of three million bags of maize to cushion Kenyans against starvation.

It is this bank that has triggered the shilling’s fall by soaking up dollars on the open market -- instead of buying from the Central Bank of Kenya

Significant decline in foreign exchange inflows arising from international economic meltdown is putting pressure on the shilling and partly explains its depreciation against the dollar in recent weeks. The international investors in the local bourse have been offloading their shares and withdrawing their investments in the country lately and this is complicating issues for the Kenyan economy.

Other divers of economy are also said to be affected and thus causing more panic in the foreign exchange markets. Tourism and agricultural export foreign exchange has dropped drastically due to the international economic problems.

A recent economic report by the a local bank mentions that the country’s international reserves dropped to 3.2 months of import cover at the end of September, from four months in January, leading in part to the shilling’s depreciation.

With economic hardship across the globe it is expected that dollar receipts from remittances by Kenyans abroad and tourism are bound to fall even more.

Floriculture, coffee and tea farmers are also breasting themselves for the worst if their dependence on export will be hard hit by the meltdown.

However, for the Kenyans abroad, it will be an opportune time to invest back home. Just last Month, a dollar was less than Ksh.70 an now it is at Ksh.80 and still going. For those in diaspora and wish to invest back home, this is the time do booming business with the foreign currency; especially the US dollar.

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