, NAIROBI, Kenya, July 27 – Central Bank of Kenya Governor Patrick Njoroge has attributed the depreciation of the Kenyan shilling to a combination of factors he says they are unable to control.
Appearing before the Senate Finance committee chaired by Mandera Senator Billow Kerrow, Njoroge said the US dollar had strengthened immensely and pushed down other currencies.
He placed the current drop of the shilling against the 2013/14 financial year at 15.9 percent.
“The US dollar is the one that has strengthened against most currencies and the others have depreciated, some even worse than the shilling. The real concern for us is the volatility of the exchange rate, how much they move, that is much more problematic – we have tried to really work on this,” said Njoroge.
The newly appointed Governor stated that the Central Bank did not have a specific target for the exchange rate saying they were however optimistic that they would be able to stabilize it before it reaches an alarming rate.
“We do understand the risks and the problems that would come from targeting a rate. We definitely want to be sure that if there is movement in the rate, it is smooth, gradual and something that can be picked up by the entire economy,” he added.
He said several external factors/global risks had affected the shilling including the instability in Greece which he said was impacting on the foreign markets.
Njoroge cited the uncertainty of the anticipated increase in the US interest rates which is projected to happen in September as the biggest external factor.
On domestic factors, Njoroge blamed the weakening of export rates on the drop saying since 2014, exportation of coffee and horticultural crops had been low while that of tea had dropped significantly.
He however noted that remittances from the Diaspora had increased significantly as per June this year it had hit an all time record of $135.9 million.
“We however do not want to run the country on remittances, we should however appreciate the Diaspora for bringing in the huge amount,” said Njoroge.
Njoroge further called on countries that imposed travel bans on the country to lift them so that the tourism and hotel industry would be restored to its former glory.
“I don’t think this will turn around immediately but it is improving,” he posed.
He urged they were more concerned about the rising budget deficit over the years pointing out that the execution of the 2013/14 budget was poor.
He noted that investors despite having resources to invest in the country, were not willing to bet on the Kenyans economy, adding that this confidence needed to be restored.
He said they had since reached out to players in the forex exchange market to talk to them about managing their purchases in a manner that will not destabilize the market.
“We have urged them to enhance efficiency and transparency because we wanted to make sure there wasn’t any destabilising, manoeuvre by the players,” he posed.
He said they were concerned about the impact of the drop on importers and even individuals who probably need to pay fees for their students and were hoping the matter could stabilise soon.