Kenya’s central bank governor, Kamau Thugge, disclosed that the country’s currency, the shilling, has long been overvalued, contributing to its historic low at 150 shillings to the dollar, down 24% year-on-year from 100 shillings in October 2018.
Thugge noted the high cost of maintaining an artificially strong exchange rate, depleting international reserves that now cover less than four months’ imports.
The depreciation, partly due to the US currency’s strength, escalates import expenses and adds to Kenya’s substantial debt, currently at over 10,100 billion shillings.
President William Ruto’s fiscal measures, including tax hikes, aim to restore financial flexibility but have triggered concerns over purchasing power, straining the economy already affected by COVID-19, the Ukrainian conflict, and regional drought.
Economic growth has slowed to 4.8% from 7.6% in 2021, with 2023 forecasts dimmer.