Kenyans in Diaspora Demand Higher Exchange Rates to Part With Their Dollars


The Kenya Shilling has been projected to fall further against the Dollar after Kenyans living abroad demanded higher exchange rates. This is according to the London Stock Exchange Group (LSEG).

Analysing the strengths of Africa’s top currencies, Reuters noted that the Shilling was depreciating as Kenyans living abroad were asking for higher exchange rates to part with their dollars.

Kenyans.co.ke spoke to economists Professor Fred Ogola and Nicholas Gachara on how Kenyans in the diaspora were playing a part in the strength of the Shilling. 

“There is a higher demand for the dollar but there is also a low supply. Kenyans in the diaspora are trying to hoard their dollar, and if they hoard their dollar, the demand for the dollar is high in Kenya but the supply is low, the demand-supply pushes Kenyan shilling to depreciate,” noted Professor Fred Ogola.

A photo of someone counting Kenyan money

Photo

AJ Kenyan Safari

“We get the diaspora remittances, and because of that, for instance, I can only send my money to Kenya if I get a higher amount in return during an exchange and if it is not high I hold on.”

The Kenyan Shilling is also set to weaken further due to the high demand for the dollar by the manufacturing sector in the country.

“Internationally we don’t buy items in Shillings, in fact immediately you leave Kenya the Shilling becomes useless, like the oil marketing companies, they will want to have the dollar,” noted Nicholas Gachara, a finance officer.

According to Professor Ogola, the dwindling Kenyan shilling could have an immense effect on the country’s debt repayment with Ogola further noting that every time the country loses a single unit of valuation in its currency, the country’s debt bulges.

“If the Shilling loses one unit of its value, it affects our debt. Because in case we lose one unit value of the shilling, we add between Ksh40 billion to Ksh45 billion in already existing debt,” noted Ogola.

“We spend Ksh53 billion per month to service our debts, so the figure may hike to Ksh58 billion or Ksh59 billion yet already we are having problems in revenue collection.”  

As of last week, the Kenyan Shilling showed some slight stability before its sudden fall this week with the latest data suggesting that the Shilling has dropped to a new all-time low of Ksh153.50 against the Dollar.

Kenya has been earning more foreign exchange due to diaspora remittances that have been said to be on an upward trend due to the number of Kenyans sending more back home.

On November 7, the Treasury as quoted by Reuters claimed that Shilling’s constant drop had ended due to reduced Dollar demand from the fuel and manufacturing sector. 

Treasury attributed the slight rise in the government to a government deal brokered by Kenya’s Ministry of Energy and Saudi Aramco, Abu Dhabi National Oil Corporation Global Trading (ADNOC), and Emirate’s National Oil Company (NOC) where Kenya has been buying fuel on a 180-day credit line hence reducing pressure on the demand of the dollar. 

Treasury further noted Kenya’s local currency had been boosted by cash flows from loans negotiated by President Ruto’s administration. 

A photo collage of President William Ruto and the Central Bank Headquarters Building in Nairobi, Kenya.

PCS





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