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Huge imports of spare parts by Kenya Airways (KQ) and equipment for the Standard Gauge Railway project are some of the key factors that led to the depreciation of the shilling especially in June 2015.
Central Bank of Kenya Governor, Dr. Patrick Njoroge also said the decline of number of tourists from Kenya’s traditional tourist markets and a major drop in receipts from agricultural exports-tea, coffee and horticulture, were other external and domestic factors that contributed to the slide of the local currency against the US dollar.


“Tourist arrivals which were about one million at the Jomo Kenyatta International Airport in 2013 dropped to 760,000 or by 40 percent”, Dr. Njoroge said.
He said while exports have dropped, diaspora remittances have contributed rise with the remittances hitting Sh13 billion in May thus helping support the shilling from further depreciation.
Other external factors which contributed to the fall of the shilling include the strengthening of the US economy and the turmoil in Greece which made the dollar stronger over other currencies.
CBK data indicates that the shilling started losing ground to the US dollar in August last year to touch a low of Sh99.20.
On July 21, 2015, the local currency touched Sh102.50, which was the lowest in three and a half years. Dr. Njoroge said internal factors piling pressure to the shilling include growing budget deficit and borrowing.
“In 2014/2015 financial year, the National Treasury projected that it would have a deficit of six percent, but by the end of the financial year, it had risen to 8.5 percent”, he said.
 In 2015/16 national budget the National Treasury projects to have a deficit of 8.7 percent but he said CBK was not sure that the ‘prudence guideline’ would be adhered to by the end of the financial year. “The question is where it will be at the end of the 2015/16 financial year”, he asked.
He said as at June this year the country’s debt stood at 47.3 percent of the Gross Domestic Product but at June it had risen to 51 percent.
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