Shock as sources reveal shilling is weaker than what CBK is reporting

The Kenya shilling is trading at an all time low of Sh. 112.07 to the US dollar. The shilling has weakened by nearly six units from mid-May when it stood at Sh. 106.40 to the US dollar.

According to a report that appeared in the Business Daily on Thursday, the weakening of the shilling has heralded the rise of commodities that depend on the exchange rate. For instance, the cost of used cars in Kenya has risen by up to 33 percent over the past six months on costly imports and a weak shilling.

“The dollar was around 106 in April and we are currently buying it between 112 and 114 depending on the bank. So, if you are buying a car worth $10,000 that is Sh. 80, 000 more,” the daily quoted Charles Munyori who is the secretary-general of Kenya Auto Bazaar Association.

Apart from the rise in price of used cars, the weakening shilling is also set to increase electricity prices through higher forex levy in power bills. Shockingly, the daily reported that banks are selling the shilling at higher rates than what the Central Bank of Kenya is officially reporting.

“A trader at a bank who requested anonymity for fear of repercussions from the Central Bank of Kenya (CBK) said that banks were selling the shilling at a higher price than what was officially quoted,” the daily reported.

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The daily further quoted the source as saying that there was dollar scarcity but fears of reprisals from the Central Bank has seen banks limit the volumes they sell at the higher prices.

“The reality on the ground is that people are buying at about a shilling higher than what is officially quoted. That is what happens when there is no price discovery and those who have the dollars take advantage,” the daily quoted the source.