This archive report was first published on 3 September 2019.
Kenya's Treasury paid foreign creditors a massive Sh140 billion in three months, piling pressure on the country's foreign exchange reserves. Increased demand for foreign currency also emanated from traders whose demand for goods increased after money in bank accounts increased by a whopping Sh50 billion between March and June this year.
According to the Treasury's latest Budget Review Outlook for the fourth quarter, the shilling weakened to exchange at 104.2 against the US dollar on July 7, a four-year low since October 2, 2015, when 104.39 units of the local currency fetched one greenback.
The country's foreign debt service increased by Sh10 billion from an initial target of Sh256 billion to Sh266 billion as the shilling took a plunge. Kenya was to pay to China Sh7.6 billion but ended up paying Sh9.5 billion.
Things would have been worse if it were not for increased remittances from Kenyans living and working in the diaspora who sent home a record Sh78.4 billion during this period, helping to stabilise the shilling.
CBK Governor Patrick Njoroge has insisted that increased inflow in diaspora remittances has little correlation with the amnesty that was given by suspended National Treasury CS Henry Rotich in his 2018/19 budget statement.
