National carrier Kenya Airways (KQ) predicted on Tuesday that it will incur Ksh.32 billion in forex losses for the year ending 2023 due to the weakening shilling against the US dollar.
CEO Allan Kilavuka informed the National Assembly Transport Committee that if the shilling trades at Ksh.151 against the US dollar, the airline projects a further loss of Ksh.64.5 billion by the end of the next financial year.
“Our main challenge at Kenya Airways is the substantial debts denominated in US dollars. Therefore, any depreciation of the Kenyan shilling against the dollar significantly impacts our financials,” Kilavuka informed the legislators.
Kilavuka also disclosed that KQ owes Ksh.33.4 billion to local banks, divided among 10 lenders. Additionally, the carrier has a debt of Ksh.59 billion to the government, which includes advances and payments made on behalf of Kenya Airways. Furthermore, the airline still has outstanding payments to other suppliers amounting to Ksh.23 billion, according to the CEO.
The shilling reached a record high against the dollar this week, trading at Ksh.150.07 at the close of Monday, as per data from the Central Bank of Kenya (CBK).
Since the beginning of the year, the local currency has depreciated by nearly 18 percent against the dollar, according to data from the London Stock Exchange Group.
CBK governor Kamau Thugge attributed the devaluation of the shilling to the high demand for the dollar. Speaking before the National Assembly Finance and National Planning Committee, Thugge called for structural reforms to ensure that the supply of dollars exceeds the demand. He suggested investing in other forms of tourism to boost the flow of US currency into the country.
“The exchange rate cannot be reduced in a month; we need a continuous system to ensure sustainability,” Thugge stated. “The overvaluation of the exchange rate was caused by a decline in international reserves. In 2022, the aggressive increase in interest rates was implemented to control inflation, which had an impact on the foreign exchange rate.”
The demand for dollars in Kenya primarily comes from the energy and manufacturing sectors.