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Kenyan Businesses Struggle as Shilling Loses Value Against US Dollar

Kenyan companies

Kenyan companies that rely on US dollar loans and imported materials are facing higher finance costs, which are eating into their profits and investments. This is happening because the value of the Kenyan Shilling is dropping compared to the US Dollar.


As per the recent Central Bank of Kenya (CBK) Weekly statistical bulletin, the exchange rate was Ksh147.94 per US dollar on September 28, up from Ksh147.26 on September 21. On October 2, 2023, when the Forex markets opened, the Shilling weakened further to KSh148.20 against the US Dollar.

Kenyan firms record losses

Several Kenyan firms have been hit hard by this depreciation. Old Mutual East Africa Group reported a substantial increase in finance costs, from Ksh937 million in 2022 to Ksh1.8 billion in 2023 – a 96% rise. They attributed this increase to higher interest rates on their loans and losses from currency exchange due to the weaker Kenyan Shilling.

Kenya Airways which has been facing losses for a while, mentioned that a large part of their pre-tax loss in the first half of 2023 was due to Forex losses, particularly a significant Ksh17 billion. KQ Group Managing Director and CEO Allan Kilavuka, highlighted that the devaluation of the Kenyan Shilling against major currencies is one of the factors hurting their financial performance.

Read Also: Kenya Airways Half-Year Loss Amidst Forex and Debt Struggles

Unga Group, the only miller listed on the Nairobi Securities Exchange, revealed that their finance costs nearly tripled, going from Ksh267 million to Ksh784 million by the end of the 2023 fiscal year.

Car & General, a listed auto dealer, had to deal with higher interest rates on their dollar loans, which rose from 6.22% in 2021 to 9.5% in 2022.

Equity Group, one of Kenya’s most profitable banks and a significant player in the region, saw its costs for borrowing in dollars increase significantly, going from Ksh570 million in 2021 to Ksh814 million in 2022, which put pressure on their profit margins.

Experts believe that the Central Bank of Kenya (CBK) is running out of foreign exchange reserves, which are assets held in foreign currencies, particularly US dollars. This shortage is causing disruptions in businesses and is contributing to the depreciation of the Kenyan Shilling, which has been happening more rapidly in 2023.

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The exchange rate reached Ksh147.8 against the US dollar on September 27, 2023, marking a 22.0% drop compared to the previous year. This is increasing inflation in Kenya due to the country’s reliance on imported goods and is also causing higher costs for servicing Kenya’s already substantial debt.


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