The shilling on Wednesday hit an all-time low against the dollar, setting up the country for more expensive imports, electricity and debt servicing distress.
Central Bank of Kenya (CBK) data shows the shilling exchanged at an average of 127.08 on Wednesday evening against the dollar compared to Sh123.42 at the start of the year.
The depreciation is linked to the aggressive rise of US interest rates to tame inflation, which led to a resurgence of the dollar and the sustained shortage in the local market since last year.
The local currency has been on the back foot since mid-2021 when it stood at Sh106.54 on the combination of weak inflows and strong dollar demand.
The shilling lost 9.0 percent in 12 months to December 2022, pushing living costs up and hurting households already subjected to high fuel and food prices.
This is expected to drag on the runway inflation since last year on the rising cost of imported goods, electricity and fuel prices.
Kenya imports various goods, including cars, petroleum, machinery, medicine and pharmaceuticals products, vegetable oil, fuel, wheat, clothing and shoes.
The Kenya National Bureau of Statistics shows inflation in February edged up for the first time in four months on renewed pressure on food and cooking gas.
Inflation — a measure of the cost of living over the last 12 months— rose to 9.2 percent from 9.0 percent in January, the first rise since October.
Households spent 13.3 percent more to put food on the table than a year earlier. This is compunded by extreme weather conditions have resulted in drought in various parts of the country, impacting food production.
In mid-January, ICEA Lion Asset Management analysts projected that the shilling could face further downward pressure in the first half of the year but may fare better in the second half as the US dollar sheds some of the significant gains witnessed in 2022.
