News / Africa

Kenyans Feel Pinch as Shilling Plummets

Cooperative Bank treasurer Caroline Mugadi in the Nairobi trading room. (file photo)
Cooperative Bank treasurer Caroline Mugadi in the Nairobi trading room. (file photo)
Gabe Joselow

The Kenyan currency has been trading this week at more than 100 shillings to the U.S. dollar, this compared to a rate of about 80 shillings to the dollar in January.

Inflation is soaring at more than 16 percent, and the Bloomberg financial news agency says the shilling is now the world's worst-performing currency.

At a marketplace in downtown Nairobi, shop owners are starting to feel the strain, as prices for basic goods and materials rise.

"Right now ... I don't have customers, and in case I have one, the amount I put in, I get less," says Bernard Ndika, whose business of selling handicrafts mainly to passing tourists is not good.

"I bought when the dollar was a bit low, and now it's gone up, which means I have to increase my prices," he says.

Robert Shaw, an independent economic analyst in Nairobi, says the shilling was initially driven down by fundamental factors that included the rising price of imported oil and other commodities.

But the recent acceleration in the currency's fall, he says, is largely driven by speculation and fear.

"What we're seeing now is a sort of panic, a frenzy, and it is probably getting to a stage where it's defying fundamentals," he says.

Central bank blames commercial counterparts

Kenya's central bank has been inconsistent in its response to the issue and has blamed commercial banks for hoarding foreign currency.

The central bank's regulator started by selling foreign currency directly to the country's commercial banks, in the hope that it could be lent out to importers struggling with the high cost of foreign goods.

But in a statement this week, central bank Governor Njuguna Ndungu'u said that strategy had failed due to lack of support from the commercial banks.

Now the bank is proposing selling foreign currency, likely at a discounted rate, directly to targeted sectors of the economy, like oil importers. Shaw says this, also, is probably a mistake.

"Whether that will create a distortion in the market is difficult to tell," he says. "[They're] basically going back to a two-tier currency rate, which most countries dispensed with over the years because they just don't work."

Campaign politics cash grab?

Back in the market stalls in Nairobi, some Kenyans are starting to speculate that hoarding of U.S. dollars is a money grab by the country's rich and powerful in preparation for Kenya's 2012 elections.

"We on the ground see there is a cartel that is working due to the election of 2012, so there's now speculation going on," says art dealer Harrison Onyango. "There is a game being played by creatures who did economics and they now know how to manipulate it and bring the beef back to their bank account."

Other countries in East Africa are struggling with the same fundamental challenges as Kenya and have also watched their currencies plummet. Uganda's shilling has fallen 19 percent against the dollar this year, while Tanzania's has also sunk to a 17-year low.

You May Like

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Goodbye, New York

This is what the fastest-growing big cities in America have in common More

Job-Seeking Bangladeshis Risk Lives to Find Work

The number of Bangladeshi migrants on smugglers’ boats bound for Southeast Asian countries has soared in the past two years More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs