Weakened shilling not a bad thing, says Parliamentary Budget Office
23 September 2015, 10:39
Nairobi – The Parliamentary Budget Office has said the weakened Kenyan shilling is “not necessarily a bad thing” despite the continued public outcry.
The July report from the office has maintained that although the weakened shilling adversely affected the country’s exchange rate, the situation has greatly made exports more competitive in the global market.
The report dubbed “Economic and Fiscal Update July 2015” raises concern that the shilling has remained stubbornly around the 100 mark despite the Central Bank’s intervention to bring it down.
“The exchange rate continues to weaken against the dollar despite measures to shore it up. Structural deficiencies in the Kenyan economy are likely to be the reason for the shilling’s persistent slide,” states the report.
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The country’s continued operation on a high current account deficit with significant import bill against moderate export earnings and the slump in tourism industry are among structural inefficiencies that have contributed to worsened exchange rate.
“Care should be taken to address the structural deficiencies in our economy to protect us from external shocks that are likely to adversely affect the economy. Interest rates are likely to remain high in the coming months thereby stifling growth in the private sector,” warns the report.
Although the inflation rate declined from 7.03% in June to 6.62% in July, 2015 attributed to lower food prices, the report raises concern on the country’s ability to maintain the inflation at the single digit level throughout the 2015/16 financial year.
It challenges the government to ensure inflationary pressures such as the ever rising cost of fuel and weakening shilling among others are controlled.
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