By JEREMIAH KIPLANG'AT
Tuesday, July 28, 2015
The shilling will continue to weaken against the dollar despite the Central Bank instituting measures to help stabilise it.
By Monday afternoon, the local currency was exchanging at an average of Sh101 for the greenback, with concerns that it could fall further this week.
To date, it has gone down by 11.5 per cent, portending tough times for the Kenyan economy that anticipated positive growth this year.
Central Bank Governor Patrick Njoroge Monday said the local unit was yet to stabilise, and measures to help it strengthen would take time before bearing fruit.
The shilling would also not react yet to the popular visit by the US President Barack Obama over the weekend, he added.
Appearing before the Senate Finance Committee, Dr Njoroge asked Kenyans to be more patient to allow the measures put in place to take effect.
“Have we solved the problem (depreciation of the shilling)? The answer is no. We are monitoring the situation very closely.
"We take this seriously because we know the impact on importers and other people directly affected,” said Dr Njoroge.
The governor was invited by senators following concerns raised in the House about the ongoing depreciation of the Kenyan shilling.
The committee, chaired by Mandera Senator Billow Kerrow, sought to know what the regulator was doing to stop further weakening of the local currency.
MOPPING LIQUIDITY
“The measures have had some effectiveness but we know that some of them take time.
"There is some tightness in the market now and we have been mopping up the liquidity to ensure it remains tight.
"We are cautiously optimistic and we need to take further measures to support fiscal order to provide stronger confidence for the private sector,” added the governor.
The country’s inflation has also shot up, worsening the currency situation and it is feared that soon prices of food and fuel may go up.
The measures that the bank’s Monetary Policy Committee put in place last month include raising the Central Bank rate for loans and the regulator’s Kenya Bank Reference Rates by the local banks.
MAKES IT DIFFICULT
The governor said the US dollar had strengthened against all other currencies across the world, making it difficult for the local measures to have an immediate effect.
“Up to last week, the shilling had depreciated against the dollar by about 11.5 per cent. The US dollar is strengthening against most currencies and pushing them down.
There is an anticipated lift-off in the US interest rates which the markets expect to happen in September. It is an uncertainty that is a concern in the currency markets,” he said.
Dr Njoroge said that local tea, coffee and horticultural exports that would have helped the forex exchange had performed poorly over the past 12 months, pushing the currency market to struggle.
He was accompanied by senior Central Bank officials.