Tuesday, April 28, 2015
Add this page to Blinklist Add this page to Del.icoi.us Add this page to Digg Add this page to Facebook Add this page to Furl Add this page to Google Add this page to Ma.Gnolia Add this page to Newsvine Add this page to Reddit Add this page to StumbleUpon Add this page to Technorati Add this page to Yahoo


ideas have consequences

You are here:Home>>Archive>>Kenyan Reserve Bank depressing Shilling?
Saturday, 30 October 2010 05:13

Kenyan Reserve Bank depressing Shilling?

Written by admin
Rate this item
(0 votes)
Kenyan shillings Kenyan shillings CBK

Kenyan shilling may not survive currency war

The Central Bank of Kenya has been levied the accusation of deliberately weakening the value of her national currency shilling in order to make Kenyan agricultural products and tourism more attractive to foreign marketers. The Governor of Central Bank of Kenya (CBK) Njuguna Ndung’u said that the accusation has no basis and no legs to stand on.  Governor Njuguna Ndung’u denied that Kenya was pursuing a weaken currency policy, a paradigm that is becoming chic among ambitious exporting and emerging nations. Kenya may have a reason to depreciate the value of her shillings to counteract the effects of global recession and drums up demands for local products and services.

Kenya has a market economy with few government controlled industries. Most of her foreign currency generated is based on commodity export and attraction of tourists to the famous Kenya wildlife industry. The major export of Kenya is coffee together with tourism are the major sources of foreign revenues.  With the global recession and economic meltdown of many industrial countries, foreign donor nations have drastically cool-off on foreign aids. Therefore many developing nations who were the receivers of foreign aids have to buckle up and compete for attraction of capitals and revenues and Kenya is no exception.

Kenya is not a wealthy country and a large percentage of the population survived with less than one dollar a day. Kenya has a recorded GDP of $30.355 Billion (2008) which has grown significantly from $17.43 billion (2005).  With the relatively peaceful environment emerging from awful political violence a while ago, Kenya is poise for a growth but the world recession has made competition tense for export and attraction of foreign capital. Kenyan government has been intervening in the foreign exchange market and utilized the accumulated revenue from export to buy foreign currency and by so doing weaken its local currency.

“Currency dealers in commercial banks have in recent months pointed to the Central Bank’s intervening hand in the currency markets as the single biggest factor that has kept the shilling weak, even as increased foreign currency inflows from agricultural exports and a rebound in tourism dictated that the shilling should be strengthening.

The dealers have said that CBK appears to be inclined on maintaining a weak shilling by buying from the market dollars and other major world currencies in large quantities whenever the shilling has shown signs of gaining value. The Kenya shilling has weakened from Sh75.5 to the dollar to Sh80.60 since the start of the year — earning exporters more shillings per unit of their produce.”

The tendency to interven becomes inevitable to exporting countries that are afraid of having an appreciating and stronger currency which may depress export by making their products and services expensive to the international buyers. The danger of inflation looms with stronger currency and excessive liquidity in the market. In this case the central banks will moderately increase the benchmark interest rate and up the foreign reserve war chest to protect its currency from foreign predators. Kenya is doing the best she can to keep her head above water and compete in the aggressive international trade and market.

Governor (CBK) Njuguna Ndung’u Photo/Business Daily

“Kenya’s import bill has grown to Sh438 billion in the first half of 2010, up from Sh245 billion in 2005, compared to exports of Sh196 billion in the first half of this year and Sh120 billion in 2005.The Central Bank accumulates foreign currency reserves for use in paying government debt, paying for imports and supporting foreign missions.”

Governor Njuguna Ndung’u has stood by his words that his country was not pursuing the policy of depressing its currency. The downside is that Kenya does not have adequate resources to wave-off wealthy nations that are competing in globalized market with same interest and motivations. With her minimal economic strength and limited resources Kenya may not sustain a currency war when it becomes imminent.

 

Last modified on Saturday, 30 October 2010 18:55
admin

admin

Website: Afripol.org E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

4 comments

  • Comment Link super real Tuesday, 03 September 2013 19:10 posted by super real

    It holds true some farmers have benefitted from your increase super real how
    to make a money tree for wedding - money trees certainly are a
    great present for several reasons, as they're handmade, include cash, and so are thoughtful with the guests to invest time
    and money to get ready them.

    This e-mail address is being protected from spambots. You need JavaScript enabled to view it
  • Comment Link Product Launch Formula 4.0 Tuesday, 03 September 2013 08:00 posted by Product Launch Formula 4.0

    I'm gone to convey my little brother, that
    he should also visit this webpage on regular basis to take updated from most recent news update.

    This e-mail address is being protected from spambots. You need JavaScript enabled to view it
  • Comment Link BTC Robot Tuesday, 13 August 2013 14:40 posted by BTC Robot

    Hi there, I want to subscribe for this blog to get most up-to-date updates, so where can i do it
    please help out.

    This e-mail address is being protected from spambots. You need JavaScript enabled to view it
  • Comment Link Bitcoin Trading Robot Tuesday, 30 July 2013 10:36 posted by Bitcoin Trading Robot

    When I originally commented I clicked the "Notify me when new comments are added" checkbox and now each time a comment is added I get three e-mails with the same comment.
    Is there any way you can remove people from that service?

    Appreciate it!

    This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Add comment