Businesses feel the heat of a weakening currency

By John Oyuke

The fall of the shilling against the dollar continues to affect the lives of ordinary Kenyans, and has challenged the viability of healthy opportunities of business in the country, Worse, it has caused discomfort over its impact on the cost of imported goods.

All sectors of the business are feeling the pressure, which has put Central Bank in a dilemma to seek for solutions on how to deal with the currency’s turbulence. Economists estimate that a five per cent drop in the value of the currency could push up the rate of inflation and significantly slow down economic growth.

It also risks increasing the amount of money that Kenya owes its financiers in debts that are denominated in foreign currency.

"More foreign exchange is needed to buy oil while the rising cost of transporting goods to and from Kenya is affecting horticulture and tourism and ultimately export earnings," Central Bank said.

Motorists and the agriculture community are also feeling the pressure or heat of the weak shilling on the domestic front.

Favourable exchange rates helped the tea sector rake in a record Sh97 billion in 2010, surpassing Tourism as Kenya’s leading forex earner. The country realised Sh73.6 billion in tourism earnings last year.

Kenya Flower Council Chief Executive Jane Ngige, however says performance of the shilling against the dollar may not always translate into good tidings.

"It is a game of cards," she said pointing out that the appreciation of value of the dollar has made it more expensive for the industry to import flower inputs including fertilizers and chemicals.