Meltdown not affecting Shilling: Michuki

October 22, 2008
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, NAIROBI, October 22 – Acting Finance Minister John Michuki maintained on Wednesday that the weakening shilling had nothing to do with the on-going financial crisis, saying the meltdown has had none or very little impact on the country’s economy.

Mr Michuki instead blamed the depreciation of the local currency against the dollar on speculation fuelled by some players in the financial sector.

“For instance, a certain bank was given a contract to buy cheap maize for farmers and instead of purchasing dollars from central bank they bought from other local banks thus fuelling the current runaway rates,” explained the Minister.

Mr Michuki’s comments came as a number of experts blamed the global crunch for rising interest rates, a bearish stock market and a weakening shilling. 

“I want to assure the country and I want you to hold me to this, that if there will be any effect it will be little and even if the short term loan to the country of  $1.2 billion was to be withdrawn suddenly, we will not be affected,” he said.

“4.1 months foreign exchange holding is not little money by any language, we are a strong economy.”

Mr Michuki was speaking at a ceremony where Austria announced cancellation of a Sh1 billion debt owed by Kenya. The money had been extended in 1991 to finance the Masinga-Kitui pipeline water supply project.

“No principal repayment was made on this loan and the implication is that the freed funds will be used to fund pro-poor projects,” Mr Michuki said.

Austrian ambassador Roland Hauser said the cancellation was a symbolic contribution and gesture of confidence in the coalition government.

“It’s not a huge contribution, but it is a way of supporting the government in ridding the county of poverty,” Mr Hauser said, adding that the Masinga project was the larges his country had ever supported in the country.

Kenya’s foreign debt stands at $423 billion.

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