While the world tries to somehow take a breath from the biggest crisis it has faced since 2008, Kenya is swatting more and more disasters that just don’t seem to be ending.
Authorities are currently dealing with massive floods, displacing thousands of their residents, and causing horrible food insecurity. This is just on top of the ongoing COVID-19 pandemic and the cracks in the Kenyan economy are starting to show.
Much like most of the world’s exotic currencies, the Kenyan Shilling has been taking hits since March, ever since the world decided that it’s time to stay home and avoid the pandemic. Its economic ties were severed with the majority of the world as freighters were believed to be one of the worst places a pandemic could spread.
Harbors were closed and border off-limits, Kenya was left to deal with the pandemic in the majority with its own resources. Unfortunately for the country, there was simply not enough to go around at the time, nor is it now. The food insecurity is a testimony to the country’s economic issues, and just how much it relies on importing daily necessities.
Considering that its biggest value comes from exporting tea & coffee to blocked off countries, the Kenyan government had to take drastic measures to somehow keep the economy afloat.
Retail FX activity
Dozens of M-Pesa forex brokers have been reporting a massive sell-off of local currencies. This is not only the case for Kenya, but it is indeed one of the largest cases. The Kenyan Shilling has depreciated nearly 7% relative to the dollar in the last 4 months alone, signaling that investor attention is being diverted from the region.
Naturally, such a change could not have been caused by retail traders alone as most of the movement is directed by large local banks as well as foreign entities. Seeing this decline it’s unlikely that foreign entities will pour in investments into the Kenyan Shilling, leaving the local banks to deal with the issue on their own.
Currently, there’s just not enough volume being circulated both inside and outside of Kenya to support sustainable growth overtime during the pandemic. However, there is still hope that foreign investors will see the potential of Kenyan Shilling growth due to its quite obvious decline.
But, until then, it does not seem likely that Kenya will handle such economic strains without a little bit of help. There’s even a chance that they may have to start selling their stakes in local foreign corporations thus losing the future potential of growth.