News
House raises concern over weak dollar
A past session of Parliament. The falling price of the US dollar has raised concern among MPs that Kenya's foreign currency reserves are at risk. Photo/FILE.
Posted Wednesday, November 25 2009 at 14:24
In Summary
- MPs argue that the falling value of the dollar was due to deliberate policies of the Obama Administration.
The falling price of the US dollar has raised concern among MPs that Kenya's foreign currency reserves are at risk.
Githunguri MP Njoroge Baiya (PNU) and Rangwe MP Martin Ogindo (ODM) Wednesday put the government on the spot over the depreciating value of the dollar, the primary unit in the foreign currency reserves.
The MPs argued that the falling value of the dollar was due to deliberate policies of the Obama Administration.
Therefore, they said, Kenya had to take steps to protect its foreign currency reserves by avoiding the dollar.
Mr Baiya said a 15 percent drop in value of the US dollar over the past eight months had placed the government’s coffers at great risk.
It is not clear how much money has been lost in debt repayment, although assistant Finance minister Oburu Oginga played down the losses saying debt repayment is done in instalments.
Dr Oginga said the weakening of the dollar, really, the strengthening on the Kenyan shilling, was because the shilling was “correcting” its value to where it was before the global economic crisis set in.
“There are no specific risks facing the country as a result of the decline in value of the US dollar,” the Assistant minister said.
He said the Central Bank was “closely monitoring” the prices to cushion the country from any severe economic shocks.
Dr Oginga assured the two MPs that the foreign currency reserves "did not have any single currency."
Ordinarily, the fluctuation of currency prices is usually contained with governments opting to buy gold or closely keep tabs on currency exchange trade and keep the most valuable currency.
In the short-term, Dr Oginga said, the low dollar prices will “moderate rising international oil prices and reduce the cost of imported inputs, both of which are crucial to the economic recovery process.”
The decline in value of the US dollar will reduce the earnings of the exporters while the importers will reap big time, he noted.
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Submitted by tonytiPosted November 26, 2009 06:46 PM
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Submitted by guarantisticExE
Great news. Make MP's pay taxes and pay back US loans! Sounds simple! The dollar has noting to do with these.CBK( Confussed Bank Of Kenya), uses no Gold reserves so they pegged all on the US dollar. Bad idea for any educated economist or banker. Chicken little... the sky is falling! Yeah right, its been falling since Kenya elected M01 aka MOI! We need to get back to the basics, control speculation to avoid a crash of NSE and reduce interest rates! A simple monetary policy!
Posted November 26, 2009 10:34 AM -
Submitted by werssylwer
For a moment they had lost me. To think that ALL our foreign currencies are in dollars was frightening. The diaspora is always sending money home and NOT all is in dollars. All the same it is reassuring to know there are MPs paying attention to these things. Weak dollar policy started with the Bush adminstration and Obama has continued with same policy.
Posted November 25, 2009 09:15 PM -
Submitted by Sierra
since we are largely a country that needs to repay debts that were given to us in dollars, does it not mean that we need fewer shillings to repay the dollar debts? and also since we are a net-importer, don't we need fewer shillings to import items than when the dollar is strong?
Posted November 25, 2009 06:35 PM -
Submitted by mungikyi
the goverment must act as the economy has shitfed and the US are not manufacturing much to the globle market,when Obama visited China he hinted on China to raise the value of their currency so that they can trade at pa with the dollar at the globle market but that is not going to happen so we need to invest on a stable currency with a wide market rage,eg, euro,
Posted November 25, 2009 05:26 PM
RSS
Importers will reap big time!!An unfortunate but true statement that the minister does not care to think what it means. WE are a net importer and a weak dollar goes further to increase our forever negative Balance of trade.I think this is more simpler economics,our exports go down and investments nose dive. Mr Minister, we should have the CBK acting swiftly on such matters of concern, or at least, at least, tell us what they are doing.