The Kenyan external debt is growing bigger, not because she is borrowing but because her shilling is getting weaker against the US Dollar.
On Thursday alone, Kenya’s external debt grew by Ksh2.5 billion after the shilling dipped by 0.1 percent to cross the Ksh103 mark.
As of yesterday (Thursday), the shilling was retailing at Ksh103.05, the sixth day it was depreciating in a row.
Combined with the recent increase in fuel prices, it is expected that the price of basic commodities will shoot due to increased cost of production, and increased cost of importation.
Last month, the International Monetary Fund (IMF) —the body that gives loans when countries are in financial difficulties— said that Kenya is artificially manipulating the shilling.
In a statement quoted on Bloomberg, IMF said that the local unit is 17.5% over-valued.
The IMF reclassified the shilling from “floating” to “other managed arrangement” to reflect the currency’s limited movement due to periodic central bank interventions.
Importers stand to lose the most while those paid in dollars and exporters stand to gain in the new development.
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