Kenyans on social media have expressed their concerns on the recent sharp decline of the shilling against the dollar. The Kenya Shilling Against Dollar is on it’s lowest.
This has been a concern because of a steep downgrade. But what does this downgrade mean. Does it have a beneficial side?
A weak shilling promotes domestic investments in the country. This means that more and more investors will flock the country to put their money into use which then means that the citizens will get employment opportunities from those investments
A weak shilling also lowers the foreign prices of our exports. This means that there will be demand for goods exported from the country due to it’s weak currency which then translates to high competitiveness in the global market which in turn improves the country’s balance in trade position.
On the other side, a strong shilling potentially reduces the competitiveness of our exports as a country which can cause a shift in the economy. This means that our exports will have it rough getting clients abroad but on the good side, the imports will become cheaper.
Depending on the country’s dependency, its better to work on strengths and reduce concentrating on weakness. As weak as our currency is, the government should concetrate more on exports and reduce on the imports to create a balance on the economic sector.
A weaker Kenya Shilling Against Dollar attracts more tourists into the country as more tourists can readily be able to afford to travel in the country. As the country becomes more affordable for tourists, on the other side, a weaker shilling affects the value of remittances sent by kenyans living abroad.
Essential items that Kenya imports including fuel, machinery and raw materials become more expensive by day because of a weak shilling explaining the recent fuel hike in the country. These are items that affect the overal goods in the country as it leads to high production costs and reduced competitiveness locally
If the downgrade increases, the CBK will have to come in to stabilize the exchange rates by selling foreign reserves to buy back local currencies to slow down the decline.
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