The Kenyan shilling has been relatively stable under a hawk-eyed central bank governor who has kept the local currency hemmed in a relatively tight band in recent years.
CBK governor Patrick Njoroge has used all the tools at his disposal to reign in a currency some, including the World Bank, IMF, Renaissance Capital and Amana Capital, said was overvalued by as much as 30%.
But the era of a buoyed shilling is coming to an end as the effects of the Covid-19 pandemic negates CBK’s interventions that included injecting dollars directly into the money market.
This has put the local unit on the ropes like several other African currencies such as the Nigerian naira (-6.96% YTD) and the South African rand (-16.55% YTD).
The shilling has depreciated 7.19% against the dollar so far this year compared to a 1.4% decline in the same period in 2019.
Importers demand for the dollar after lockdown measured eased in early July has pushed the shilling to a new record low against the greenback of 108.20, breaching the 107.80 previous all-time low it reached in 2011, according to Reuters.
Of course, KES cannot be compared apple-to-apple to the rand and the naira due to other underlying factors and the composition of their economies. However, Coronavirus is a common denominator.
Looking at these other African currencies it is inevitable that KES will take a similar downwards trajectory.
Kenya’s key exports from commodities such as tea and horticulture and hard currency earners such as Tourism and diaspora remittance have been hurt by the global Covid-19 pandemic.
Locally, measures put in place to slow the spread of the novel virus have also cut consumer demand and affected tax collection, with the state tax agency reporting that it had sliced collections by Ksh.57.43 billion in the five months to May.