On Thursday, the shilling was trading at the lowest, at Kshs 110.05. The shilling value will continue to weaken in the short term as the demand for the dollar increases during this festive season. Finance analysts have predicted that the value of shilling, the country’s local currency, will remain shaky.
Foreign exchange inflows always contribute to the stability and increase in the value of the local currency. For the shilling to gain back its stability, there must be a substantial recovery in the tourism sector and agricultural exports. Also, sufficient foreign exchange reserves can lead to the recovery of the local currency value.
The predicted weakening of the US dollar following their recent elections could have partially led to shilling stability. However, their successful elections that were concluded recently led to the strengthening of the dollar.
Notably, restrictions installed during the Covid 19 pandemic period have led to a significant drop in foreign exchange inflows. Tourism and export have been negatively affected by travel restrictions. Following the lifting of bans, there has been an increase in imports, which has hurt the shilling further.
The currency will experience more pressure this season as organizations place new product orders and the government repays the coupon debt.