The Lower Eastern Times Opening The Third Eye
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In the global context, exchange rates often go unnoticed by many individuals whose affairs and businesses primarily operate locally, using the domestic currency, the Kenyan Shilling. People typically pay attention to exchange rates only during occasional transactions involving foreign goods, healthcare services, travel, or overseas remittances.
The Central Bank of Kenya (CBK), through its Monetary Policy Committee (MPC), holds bi-monthly meetings to discuss various matters, including the exchange rate market’s current developments. The strength or weakness of the Kenyan Shilling can directly or indirectly influence factors such as mortgage interest rates, investment portfolio returns, local supermarket prices, and job prospects.
Examining the depreciation of the Kenyan Shilling in the open market over the past few years reveals a concerning trend. The USD to KES exchange rate has steadily increased, causing economic challenges. Some entities, like the Kenya Power and Lighting Company (KPLC), have taken measures such as billing certain clients in USD to hedge against unfavorable exchange rates.
The depreciation also has a tangible impact on individual consumers. Rising costs are evident in everyday purchases, as illustrated by the case of Jane, who faced an increased price for a blouse due to currency depreciation. Similarly, businesses, like second-hand clothing traders, such as Bob, are feeling the strain. Bob, with over three decades in the business, attributes a decline in stock and employees to challenging times caused by the devalued shilling.
Conversely, some individuals, like Jacob, have adapted by investing in solar power to reduce electricity costs. However, the burden of a devalued shilling extends beyond individual experiences. Importers, manufacturers, healthcare seekers abroad, and those purchasing fuel products are all adversely affected, leading to increased costs and, subsequently, higher prices for goods and services.
Despite the challenges, economists note some positive aspects of a weaker shilling, such as making exports more competitive in international markets. However, the overall impact on the economy is complex, with various sectors experiencing both advantages and disadvantages.
While the CBK asserts that Kenya’s exchange rate is generally within an acceptable range, the uncertainty of where the shilling will stabilize leaves the general population grappling with the challenges of a depreciating currency without a clear endpoint in sight.
