Nairobi, Kenya | Xinhua | The Kenyan shilling hit the lowest level ever against the U.S. dollar this week as the East African nation grapples with a dollar shortage crisis, the Central Bank of Kenya said in its update of the financial markets released Friday.
The shilling traded at an average of 128.59 against the dollar, a historic low compared to 127.29 the previous week, said the apex bank.
The decline was partly blamed on the bank’s inability to support the shilling when it faces pressure from major international currencies due to low forex reserves.
Kenya’s forex reserves similarly decreased to the worst level in 11 years this week, standing at 6.56 billion dollars, an equivalent of 3.67 months of import cover, according to the apex bank. This was a drop from 6.86 billion dollars, an equivalent of 3.84 months of import cover at the end of February.
The dwindling reserves that have fallen below the requisite four months of import cover cannot adequately support imports as well as cushion the shilling.
Kenyan traders have been forced to source for dollars from across the border, especially in Tanzania, due to the crisis, local media have reported.
The shilling has depreciated about 10 percent year on year, blamed on the aggressive rise of the benchmark rate in the United States to tame inflation, which has led to a resurgence of the dollar and the crippling shortage of the greenback in the local market amid stifled inflows.