Kenya Shilling Set for Longest Losing Streak Ever on Virus Hit
(Bloomberg) -- Kenya’s shilling is on track for its longest losing streak on record, capping five months of declines, as the coronavirus pandemic curtails earnings from tourism and cut-flower exports.
The hospitality industry, Kenya’s biggest foreign-currency earner after remittances and farm produce, is forecast to contract 39% this year, according to the Central Bank of Kenya. Production of cut flowers dropped 19% in the first nine months of the year, while coffee output slumped 31%. Kenya is the biggest supplier of flowers to Europe.
The shilling declined for a 13th straight day on Monday, the longest run since at least 1988, when Bloomberg started compiling the data. It has weakened every month since June, taking losses this year to 9%.
“There is a lot of uncertainty globally and people prefer holding dollars and other hard currencies,” said Mathew Kabeere, a trading Specialist at EGM Securities in Nairobi. Measures to contain the spread of the virus slowed inflows of dollars, adding to pressure on the shilling, he said.
Kenya’s currency slipped 0.1% to 110.09 per dollar by 2:07 p.m. in Nairobi, set for the weakest closing level on record.
The shilling’s weakness may help Kenya’s economy recover from the pandemic, according to the World Bank. Gross domestic product contracted 5.7% in the second quarter, but the nation’s Treasury forecasts 0.6% growth for the full year, and a rebound of 6.4% in 2021.
“Depreciation like this can be quite constructive and helpful in terms of supporting the international competitiveness of domestic production,” said Alex Sienaert, a senior economist at the World Bank’s office in Nairobi.
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