Pound trades at its lowest since last week’s vote

Kenyan exporters are staring at losses as the British currency touched its weakest point on Friday against the Kenyan shilling since the United Kingdom voted to leave the European Union.

Central Bank data shows one sterling pound was trading at Sh134 on average yesterday. This is an 11 per cent drop from the high of Sh150 a weak earlier. It is also the lowest the pound has exchanged against the Kenyan shilling this year. The highest point was in September last year when the pound was sold for Sh163.

Exporters are the biggest losers with this decline given that they will be earning at least Sh16 less for every pound worth of exports they sell. Kenya mainly exports horticultural products and tea to the UK. Players in the tourism industry will also suffer the exchange losses should the trend continue.

Kenya Flowers Association (KFC) CEO Jane Ngige said the exit is bound to lower flower sales. Kenyan companies that export goods and services to the UK also face the risk of a prolonged slowdown or even decline should Britain economy suffer a downturn.

However, importers of motor vehicles among other items from the UK will reap benefits of a weaker currency. Also Kenyan students studying in the UK will end up paying less fees. However, the decline is yet to affect the country's forex reserves given that the major currencies have remained steady.

The Euro has remained marginally unchanged, weakening by about Sh3 from last week's high of Sh115.
On its part the dollar remained unchanged, trading at Sh101 on average against the home currency. Kenya mostly pays for its imports using the dollar. Central Banks around the world were thrown into a frenzy after the vote last week.

A vote in favour of a breakaway was expected to have ripple effects on its key trading partners across the world and this saw them work overdrive to cushion their currencies from shocks. The Central Bank of Kenya (CBK), said the country had sufficient forex reserves to cushion it against any financial turbulence that may hit the global economy in case of a negative outcome of today's vote in Britain.

CBK Governor Patrick Njoroge said although the country may be hit in case of global financial markets go South, it has built sufficient forex reserves to weather any storm from the fallout. Dr Njoroge said whatever the outcome of the British exit from EU (Brexit), Kenya has about Sh560 billion ($5.6 billion) in forex reserves that can cover five months of its import bill.

"We also have $1.5 billion (Sh150 billion) available for us from the IMF precautionary window that we can draw from in case of need," he said.

The International Monetary Fund (IMF) more than doubled the emergency loans available for Kenya in the next two years to Sh150 billion. This means that cumulatively, the country has more than Sh700 billion to protect itself from any external shocks.

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