LACK OF TOURIST DOLLARS PUSHES KENYA SHILLING TO THREE YEAR LOW
(Posted 16th September 2014)
The Kenya Shilling yesterday reached a three year low when the currency breached the crucial threshold of 89 to the US Dollar, after sliding for the past few weeks already.
Market analysts now already predict that a further devaluation may take place to as low as 90 Kenya Shillings to the US Dollar, unless the Central Bank of Kenya decided to flood the market with dollars, which however is seen as a short term measure as the underlying factors all point to the loss of value for the currency.
Particularly painful is the lack of tourist dollars which in the past were spent freely giving a boost to a range of hospitality and peripheral businesses while remittances for hotel bills, transport and such added elements like airport taxes helped boost the balance of payments. Additionally have traditional agricultural exports like tea and coffee attracted lower prices, further increasing the pressure on the local currency.
Tourism contributed some 100 billion Kenya Shillings to the economy two years ago but this has significantly dropped as tourists stayed away as anti-travel advisories hit in particular the Kenya coast very hard, leading to the closure of many hotels and lower occupancies among those still open.
While exporters of for instance flowers will see their earnings rise as the shilling value drops, will importers of goods and services have to face up to higher prices, a double edged sword and likely driver of future inflationary surges.
Meanwhile are tourism stakeholders keenly watching what funds the treasury will actually release, after the government has promised to boost tourism marketing with 900 million shillings, wary of the fact that a previous promise of some 200 million made earlier in the year has dragged on leaving the tourism board short of campaign cash at a critical time.
