As Shilling weakens, Kenyans need to tighten their belts

An illuistration on an unstable shilling. [File, Standard]

The depreciation of the shilling to the dollar, the highest in years, poses a major pain point for many Kenyan companies. At the end of last year, the shilling closed at 121 to the dollar. This half year to June, it has closed at 140, a delta of 19 shillings in just six short months. Most impacted are companies that have huge dollar loan stock. For instance, a company that took a dollar denominated loan of 100 million last year now has to contend with a book loss of Kenya Shillings 1.9 billion.

Currency depreciation is not restricted to Kenya alone. Many countries in Africa have registered the same trend. Information from the IMF blog says, "depreciations across the continent are mostly driven by lower risk appetite in global markets and interest rate hikes in the United States pushing investors away from the continent towards safer and higher paying US treasury bonds." Economist Ndiritu Muriithi confirms as much in a newspaper article saying, "investors are selling off their holdings of Kenyan stocks and moving their monies to US dollar assets because interest rates are comparatively high."