Kenya: Kenyan shilling plunges to over four-year low against the U.S. dollar
March 23, 2020
The Kenyan shilling (KES) plummeted against the U.S. dollar in recent weeks as fears over the impact of the spread of the Covid-19 pandemic rattled markets. On 20 March, the shilling closed the day at 106.0 KES per USD, which represented a 4.4% depreciation over the same day of the previous month and marked the lowest value since September 2015. As of that date, the shilling was down 4.4% year-to-date and 4.7% compared to the same day last year.
Concerns over the potential economic fallout from the spread of the coronavirus pandemic weighed heavily on market sentiment in recent weeks, increasing demand for safe-haven assets and leading to a sharp weakening of the shilling. Moreover, the lockdowns in Europe—the country’s largest export market, particularly for flowers—and widespread travel restrictions are seen curbing hard currency earnings, while remittance inflows are slowing.
On the monetary policy front, the Central Bank announced on 16 March measures to offer relief to distressed borrowers by allowing commercial banks to extend loans for up to a year to those who get into difficulties due to the coronavirus crisis. Furthermore, small- and medium-sized firms affected by the pandemic will also be able to restructure their bank loans at no cost, while charges and limits for mobile transfers have been removed in order to promote mobile money transactions, reduce the need for cash transactions and thereby prevent the spread of the virus.
Author: Hanna Andersson, Economist