The shilling hit an all-time low against the dollar yesterday, signalling a rise in inflation and a higher cost of imported goods.
Central Bank of Kenya (CBK) data shows the local currency exchanged at an average of 121.0706 yesterday, setting up the country for more expensive imports, electricity and debt servicing distress.
The continued weakening of the local unit is expected to push up the cost of living, hurting households already reeling from high fuel and food prices.
A weak shilling puts an extra strain on the economy, given Kenya is an import-driven economy. Kenya imports various goods, including cars, petroleum products, machinery, medicine and pharmaceuticals products, vegetable oil, wheat, clothing and shoes.
The cost of servicing Kenya’s public debt, which stood at Sh8.579 trillion at the end of June, is also set to rise, with a weakened shilling piling pressure on the public purse.
The country’s inflation — a measure of annual changes in the cost of living — hit 9.2 per cent in September from 8.5 per cent in August, the Kenya National Bureau of Statistics (KNBS) reported. This is above the 7.5 per cent target by CBK.