Roses in a greenhouse at Red Lands Roses in Ruiru. Horticultural products exporters to the European Union have been hit by a weak euro as the world’s second largest reserve currency touched seven-month low against the Kenya shilling this month.

Horticultural products exporters to the European Union have been hit by a weak euro as the world’s second largest reserve currency touched seven-month low against the Kenya shilling this month.

The local unit has been steadily gaining strength against the euro since July last year in what analysts say will have an effect on earnings from exports to Europe.

Central Bank of Kenya quoted the shilling at Sh103.8 to the Euro yesterday, a sharp drop from Sh120.4 recorded at the beginning of July 2014. The euro last dropped to these levels in mid-2012 when in touched Sh103.

Kenyan exports to Europe comprise mostly agricultural products including tea, coffee, fresh fruits and vegetables as well as cut flowers.

A weak euro means fewer shillings for each euro exchanged thus dealing a double blow to exporters to Europe, as they invoice their produce in euros but procure their inputs in dollars.

The dollar has, on the other hand, been firming up against the Kenya shilling to touch Sh91.7, piling pressure on an import-dependent economy as importers have to folk out more shillings for a dollar.

“It is definitely a blow to us considering how weak the shilling is against the dollar yet all our imports are paid in dollars,” Kenya Flower Council boss Jane Ngige said. The council does not, however, have a figure of projected losses.

Registered sharp rise

Cut flowers and fruit exports to Europe registered a sharp rise in volume and value in the first nine months of last year to Sh4.4 billion from Sh4 billion according to data from Kenya National Bureau of Statistics.

Horticulture is also just recovering from losses suffered after a three-month delay in signing new trade deals – Economic Partnership Agreements- with the EU placed the country into a higher tax bracket. The agreements were, however, reached in late December providing relief to stakeholders.

Traders attribute the decline to political upheavals in the Eurozone that have resulted in the currency also touching an 11-year low against the US dollar.

“The Euro has not been doing well due to political uncertainties in Russia and the Greece situation thus attention has shifted to the US, which seems to be doing well as reflected in its currency,” head of treasury at Equatorial Commercial Bank Bernard Omenda said.

Source: Daily Nation

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.