Business News
Panic as shilling hits lowest level
The shilling fell to the lowest level, exchanging at Sh102 to the dollar on September 26, 2011. PHOTO/ FILE
Posted Monday, September 26 2011 at 22:00
In Summary
- Uncertainty prevails in markets as the exchange rate stands at Sh102 to the dollar
The shilling on Monday fell to the lowest level, exchanging at Sh102 to the dollar.
This plunged markets into uncertainty. As a result, it is now difficult for businesses to either predict or plan their activities.
“If you took your child for further education abroad, you don’t know how much you will pay in shillings. You cannot even plan how much you will save because you don’t know how much you will spend in a month because prices keep on changing,” said Ms Eunice Wamaitha, a commentator on monetary policy issues.
The situation shows that efforts by the Central Bank of Kenya (CBK) to stabilise the exchange rate are yet to yield results.
Market players said CBK came into the market selling an unspecified amount of dollars but this has not brought respite in the fall.
CBK sold the dollars to individual banks on the basis of their demand.
Since January, the Monetary Policy Committee and the CBK have made several material changes to the monetary policy mainly by increasing interest rates.
They hoped that holders of foreign exchange would be attracted by the high rates to release the dollars in the market.
The shilling has fallen by about 24 per cent since the beginning of the year, from Sh80.8 to the dollar on January 3 to Sh102 to the dollar on Monday.
The currency has lost 43 per cent of its value since March 4, 2007, when the current CBK governor, Prof Njuguna Ndung’u, took over the reins of power.
With the government rolling out several infrastructure projects, including roads and expansion of the port and airports, there are fears that some of them may become more expensive to implement.
The free fall of the shilling is the latest sign of worsening macro-economic conditions.
Inflation is currently at the rate of over 16 per cent.
In August, the poor in Nairobi were experiencing an inflation rate of 17.1 per cent, while the middle and upper classes were facing an inflation rate of 11.3 and 12.9 per cent respectively.
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Submitted by KurlupanddyePosted October 07, 2011 12:38 PM
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Submitted by kmmohan
Kenyan banks are acting shylocks by hoarding forex thereby devaluing the shilling. The CBK should regulate the maximum forex a bank can purchase and retain commensurate with its liquidity in local currency. I think banks have found out that speculating in forex is more profitable than lending money that has a risk element.
Posted October 02, 2011 09:52 AM -
Submitted by wikileaks01
I am happy this is happening under Kibaki (the Economist) time. That way, his people can realise he wasnt a magician after all. Just imagine the insults MOI or RAO would get, if any of them was at the helm!
Posted September 28, 2011 08:35 AM -
Submitted by praxicharles
When former president vacated office the ksh was 55 to the dollar,kibaki came and it jumped to 80s,raila joined its now 102.Yet this are leaders whom we waited for years to deliver us to a new kingdom,but not,it was all an illusion.
Posted September 28, 2011 08:01 AM -
Submitted by rofi
Prof, what you are doing bypassing the banks is a sign that you are not capable of controlling them. It is an exercise in futility. You are always coming up with the most fantastic explanations.
Posted September 28, 2011 07:40 AM
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This article is hilarious and just shows the injustices in Kenyan society...It talks about the suffering of someone who can't afford to send there child abroad for further education....lol. The majority of mwananachi are worried about ugali and sugar and could never afford a visa let alone education abroad.