As Kenyans approach the new year, the cost of imported goods is set to shoot as the shilling hits an historic low against the dollar.
On Monday, December 19, Central Bank of Kenya (CBK) data showed the the Kenyan shilling exchanged at an average of 123.05.
The depreciation which stands at almost 9 percent is expected to result in the hike of imported goods, common services and necessities such as electricity.
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Kenya’s main imports include petroleum products, machinery, medicine, vegetable oil, pharmaceuticals, cars, wheat and clothing.
In May 2022, Kenyan shilling crossed the Ksh 116 mark against the dollar for the first time.
At the time, the shilling closed trading at Ksh 116.1 to the dollar, compared to Tuesday’s Ksh 115.99 and has depreciated from Ksh 113.13 at the start of the year.
“The decline is due to the ongoing dollar shortage. Nothing has changed and we see it continuing to lose ground. CBK [Central Bank of Kenya] is also struggling to keep their reserves above the import cover,” said Kenneth Minjire, senior associate for debt and equity at stockbroker AIB-AXYS.
The shortage forced industrialists to start seeking dollars in advance as it puts a strain on supplier relations and the ability to negotiate favourable prices in spot markets.
For instance, Kapa Oil Refineries was forced to suspended some of its operations over limited raw materials.
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The Rina vegetable oil maker said the dollar shortage in the country has rationed its acquisition of imported raw materials.
The company’s marketing manager Sid Shah said they are operating below the required production capacity due to shortage of raw materials.
He further warned of consequences should the dollar shortage situation continue to worsen.
“Our operations have been hampered due to the dollar scarcity and inability to access raw materials. This could lead to a fresh round of hike in prices for edible oils,” Shah said.
Pwani Oil also announced the closure of its oil plants due to shortage of raw materials.
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