KENYA’s economic experts and business community have raised concerns over the rapid falling exchange rate of the Kenya shilling, which is currently selling at 106.47 shillings for 1 U.S. dollar.
The economists, who decried the sliding further of the local currency on Tuesday, called for urgent measures to be put in place to contain the rapid escalation of the exchange rate.
The Central Bank of Kenya (CBK) and Kenya National Chamber of Commerce and Industry (KNCCI), a trade lobby group, said the banking industry had began to suspect that there was speculation on the currency, which the apex bank may be keen to stop at an early stage.
“The continuous dropping of the value of the Kenyan shillings is a serious matter to the citizens of Kenya given that we do a lot of trade with other countries,” KNCCI Western Kenya chairman Israel Agina told Xinhua.
According to Agina, if nothing is done to address the dropping value of the shilling, the economy of the country is likely to collapse.
Also on Tuesday, the CBK summoned the chief executives of commercial banks for an emergency meeting to discuss the exchange rate as the shilling approaches the all-time low rate of 107 units to the U.S dollar.
As at the opening of markets Monday morning, commercial banks sold the dollar for 105.64 shillings on average while the forex bureaus sold the same for as high as 107 shillings. Bank rates, however, went up in the afternoon as the institutions were selling the dollar at 106.60 shillings, only 0.40 shillings short of the 107 shillings low achieved on October 12, 2011.
In June, the currency, which had this year weakened by nearly 8 percent, had come under pressure from a stronger U.S. dollar, a widening current account deficit and sustained high demand for foreign exchange.
Despite the attempts by the CBK to raise the basic lending rate to tame its rapid weakening, the shilling is still expected to come under renewed pressure in the coming months, according to the experts.
According to a recent research by the Standard Chartered Bank, the rising imports in the face of dwindling exports as well as slow recovery in crude oil prices in the global market, will continue putting the shilling under strain.
“It is saddening that developed countries like Japan, the U.S. among others are selling more and buying less while Kenya, which is a developing country, buys more and sells less,” Agina added.
He also observed that business people in Kenya are likely to hit by the dwindling shilling because the products they import are likely to cost highly.
“We are seeing a scenario where importing raw materials, chemicals, machineries will be much more expensive because of the dwindling shilling, and this is likely to impact negatively on the economy of the country,” said Agina, who is also the chairman of the business community in Western Kenya.
Rose Atieno, a second hand clothes businesswoman based in Kisumu County, said she has stopped importing Ladies and Men’s ware clothes from Turkey and U.S. because of the dwindling value of the shilling.
“Importing clothes is becoming very expensive, and I’m now forced to stop my business for a while until the shilling gains its value,” Atieno said.
“If you look at the exchange rate of the dollar, this does not give any positive results. It is very much demanding and if we are not careful, then our economy is on its way to collapsing,” said Francis Wangara, national secretary general of the Kenya Union of Sugar Plantation and Allied Workers Union (Kupaw).
“And it will be very unfortunate for the jubilee government to allow the economy crumble in their hands. In history of this country, this is the worse we have seen,”he added.
Wangara warned that if something is not done quickly, then they would even demand the resignation of CBK governor Patrick Njoroge because he has failed to tame this rapid escalation of exchange rate.
The trade unionist urged Njoroge to do something to make sure that “we contain this situation because the cost of living will be unbearable and Kenyans will not sit down and watch when these things are going to impossible areas of management.” Enditem. – ANA