Experts, traders raise concern over dwindling Kenyan Shilling
09 September 2015, 20:39
Kisumu - 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
According to Agina, if nothing is done to address the
dropping value of the shilling, the economy of the country is likely to
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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
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
"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."