A unit of sterling pound has fallen below Sh130 against the shilling, which means lower costs for imports from the UK, as well as decreased export earnings for farm produce to that European nation.
The UK currency has dropped to a record low against the globally-bullish US dollar on Monday. Markets reacted to last weekend's UK's biggest tax cuts in 50 years, which have raised the cost of the UK government borrowing. The weakening of the pound against the dollar is reflected in other markets partly because the greenback, the US currency, serves as the global benchmark in foreign exchange markets.
The shilling appreciated 3.42 percent against the pound on Monday, the biggest gain in nearly 14 years. Central Bank of Kenya data shows the shilling last appreciated at a faster pace of 3.82 on January 20, 2009.
Kenya mainly sells agricultural produce such as cut flowers, vegetables, fruits, coffee, and tea to the UK. The Euro has also dropped to a 20-year low against the dollar this year, amid the risk of recession.
The strengthening shilling against the pound will also slightly ease Kenya’s external debt burden, with 2.3 percent of Kenya’s external debt load of about Sh4.3 trillion denominated in the UK currency as the end of June.
Source: businessdailyafrica.com