, NAIROBI, Kenya, May 12 – The Central Bank of Kenya (CBK) on Tuesday downplayed concerns over a weakening shilling, saying it had enough reserves to shield the currency against major turbulence.
CBK Deputy Governor Haron Sirima attributed the current levels to panic and speculation in the market, as he said the institution had enough cash reserves coupled with the International Monetary Fund(IMF) cautionary facility that were adequate to protect the shilling from weakening further.
Kenya and IMF agreed on a stand-by loan deal to support the country’s economic reforms and give it a cushion against external shocks.
Sirima said the bank planned to scale up buying and selling of government bonds on the open market to tighten liquidity further and stem market volatility.
“The bank continues to intervene in the foreign exchange market through the direct sales of foreign exchange to ease demand pressures,” Sirima added.
The Kenya shilling has depreciated by five percent from January to April 2015 owing to demand for the United States (US) dollar attributable to the growing US economy. Other factors include the growing imports, and a sluggish export as well as a negative growth from the tourism sector.
“There is volatility in the global market especially in the region for instance the Nigerian Naira has depreciated by nince percent during the period, Uganda shilling has also depreciated by nine percent, the Ghanaian currency Cedi has depreciated by 20 percent.. even the EURO has depreciated by 11 percent,” Sirima said.
He says strong inflows of remittances and other multi and bilateral funds as well as recovery of the global economy will support exchange rate stability.
CBK will continue to monitor the development in the foreign exchange market but allow genuine demand and supply factors to determine the level of the Kenya shilling exchange rate. The shilling on Monday opened trading weaker from Friday’s close of 95.50 against 95.60 to the dollar.
There was a lot of demand for the dollar in Tuesday’s trading that has caused the shilling to sit ground against the dollar.
On Tuesday’s trading session, the shilling traded at 96.65 against 96.85 shillings to the dollar with some interbank and corporate demand. Commercial Bank of Africa (CBA) treasury department said the shilling is expected to reign bound going forward.