NAIROBI, Kenya, May 8 – Kenya is operating a safe shilling compared to a free float currency which has placed the country at a risk of making the country’s exports more expensive.
Speaking during the launch of Kenya’s Economic Puzzle Report by Amana Capital Limited, Chief Investment Officer, Reginald Kadzutu said the shilling is overvalued.
“The shilling’s exchange rate which was at 72 against the dollar in 2009 is now at Sh100 to Sh101, representing 20 percent devaluation, meaning the shilling is overvalued by 30 per cent, ” he said.
According to the report by Amana Capital, the consumer price index which was at Sh97 in 2009 has now risen to Sh192 reflecting a rise in the economy where Kenyans are spending Sh192 to purchase what roughly 10 years ago could be bought at Sh100.
The report supports International Monetary Fund’s views on the shilling which was earlier refuted by the Central Bank of Kenya.
Last year, the IMF said that the country had sustained up its shilling where Kenya said that it was puffed up by 17 per cent.
Central Bank Governor Patrick Njoroge however ignored the claims and said that IMF was being unfair at its rating.
The CBK governor defended the shilling’s stability saying is majorly supported by micro-economic basics where the value is a free float kind.