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Kenya Shilling Hits a New low As Import Prices Soar

The Kenya Shilling was quoted at a mean rate of 113.8353 by the Central Bank of Kenya(CBK) when trading opened at the forex markets this Monday, 28th February 2022. This is compared to KSh 109.70 against the greenback six months ago.

According to the Central Bank of Kenya(CBK) Weekly Bulletin, the Kenya Shilling exchanged at 113.80 per US dollar on February 24, compared to 113.64 per US dollar on February 17

A rapidly weakening local unit has made matters difficult for importers, a problem made worse by bottlenecks in global supply chains, pushing up container and shipping costs.

Imported products including oil, machinery and other capital goods have become increasingly so costly.

For instance, used car prices in Kenya have jumped by an average 37% over the past six months owing to a depreciating Kenya Shilling as demand outstrips supply globally on production cuts.

Apart from a weak Shilling, Russia’s military action with Ukraine on February 24 has increased geopolitical tensions which could see a hike in fuel pump prices in Kenya.

As a result, global equity markets declined and commodity prices rose sharply.

International oil prices increased during the week ending February 24, partly reflecting the heightened global risks from the Russia – Ukraine conflict .

Murban oil prices rose to US$ 100.65 per barrel on February 24 compared to US$ 94.21 per barrel on February 17, 2022.

According to a brief by AIB/AXY Africa,the recent increase in petrol and diesel prices has contributed to the current depreciation of the Kenya Shilling.

“We anticipate that diesel and petrol prices will continue to increase as they trail global crude oil prices which have been on the rise due to global economic demand growing. This will exert more pressure on the Kenya Shilling which is likely to lead to further depreciation, say analysts at AIB/AXY Africa

Kenya Shilling depreciation against US$ in the January-February 2022 period

As of February 3rd 2022 , CBK’s usable foreign exchange reserves stood at $ 8,224 million (5.03 months of import cover.

The latest CBK Weekly bulletin shows that this cover has depleted to US$ 8,130 million (4.97 months of import cover) as at February 24.

Figures from CBK also show the Kenya Shilling indicative mean rates against the US$ was 113.57 on January 28th, 113.61 on 7th February 2022 and 113.63 against the greenback on 10th February 2022.

ALSO READ: Kenya Shilling hits New Low of 113.49 Against the US$

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