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Find out why value of Sh1,000 has halved since 2013

Internal and external factors have contributed to the decrease in purchasing power

This picture taken on September 30, 2019 shows old and new-issue currency bills on a desk at a branch of a local bank in the Kenyan capital, Nairobi. (Photo by TONY KARUMBA/AFP via Getty Images)

In just nine years, the value of a Sh1,000 note has depreciated by nearly half. A Sh1,000 in August 2013 for example is now worth Sh548.60 in real terms.

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The depreciation in the note also had an impact on its' purchasing power. Purchasing powers refers to a phrase to describe the quantity of goods or services that a currency can buy.

The erosion of the buying power can been attributed mainly to an increase in prices of food and energy. Other factors include corruption and mismanagement, weak currency, taxes and external factors such as conflict.

The high cost of living for Kenyans intensified this year especially after Russia invaded Ukraine. Following the invasion, oil prices hit the highest level in history. Wheat prices also increased since Ukraine is exporting 60% less than last year.

Another commodity that hit skyrocketing prices is maize flour commonly referred to as 'unga' in Kenya. In July for example, a 2kg packet of unga was retailing between Sh200 and Sh250 from a low of Sh120, a 67% increase in just three months.

In an attempt to cushion Kenyans, President Uhuru Kenyatta on July 20 directed that his administration would subsidise the cost of maize flour to make millers sell the product at Sh100 per 2kg.

However, the directive by the President is yet to come into effect as most large retail stores still sell unga between Sh200 and Sh250.

The Kenya shilling between July 18 and 22 depreciated by 0.3 per cent against the US dollar, closing Sh118.6, from Sh118.3 recorded the previous week.

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