CBK boss summoned over weak shilling

The parliamentary committee on Finance has summoned Central Bank governor Njuguna Ndung’u to explain what measures he is taking to rescue the shilling from falling and further hurting the economy.

Committee chairman Chris Okemo told the Sunday Nation that the condition of the shilling against the dollar would hurt ordinary Kenyans and the Executive should take stricter measures to stem any further fall.

“This committee believes that the situation which has seen the Kenya shilling lose ground to the dollar making it too volatile is worrying and costly to the ordinary mwananchi  and millions of Kenyans living on Sh100 a day or less. The trend is not sustainable and there is no guarantee it will not hit higher limits and hurt the economy and people further,” Mr Okemo said in a statement issued on behalf of his committee.

“We demand answers from the Central Bank of Kenya Governor and the Monetary Policy Committee and what actions are being rolled out. What is it that could have happened that Kenyans do not know? The country is enjoying stability compared to the 2007 post-election violence period. Who could have mopped up the dollars from the market and with what intentions?” Mr Okemo wrote.

The chairman appeared to suggest that there was more than meets the eye in the fall of the shilling given that it had withstood biting drought, shortage of food and energy and high inflation rates.

“We are concerned that prices of essential commodities like milk, bread and flour continue to rise and the excuse of retailers is the slumping Kenya shilling,” he said.

The summons to Prof Ndung’u came two days after MPs on Friday filed a Notice of Motion to investigate the declining value of the shilling. (READ: House plans to probe weak Kenya shilling)

On a day that saw the shilling lose momentum after two days of gaining against the dollar, MPs announced plans to look into the role of the CBK and commercial banks in the weakening of the shilling.

The Notice of Motion, filed by Wajir West MP Adan Keynan proposes the formation of a select committee to investigate and recommend a solution. The committee would table its report to the House within four months.

According to Reuters, by midday Friday, commercial banks were quoting the shilling at 99.80/100.00 against the dollar, weaker than Thursday’s close of 99.50/80.

At the same time, President Kibaki on Friday assured Kenyans that the CBK and other government agencies would implement measures to stabilise the shilling.

The President said the measures would address the speculation in the trading of foreign exchange as well as reduce the rate of inflation.

“In addition, the Central Bank will build up its foreign exchange reserves to considerably reduce the volatility in financial markets,” he said.

While the CBK has blamed commercial banks for holding onto the dollar to weaken the shilling, the banks say poor policy decisions by CBK are to blame.

The shilling is currently the worst performing currency in the world, having lost over 20 per cent of its value to the dollar since January.

FKE Executive Director Jacqueline Mugo says the government’s interventions to stabilise the shilling “is a little being done too late and is not having desired impact.”