The shilling has been under pressure trading at 97.05/15 as of today. The global strength of the dollar has resulted to the weak shilling, not to forget a widening current account deficit and sustained high demand for foreign exchange.
Ahead of the anticipated financial budget reading, the shilling has turned its heat to borrowers who will have to part with more to take care of higher interest rates after Central Bank raised the benchmark to support the diminishing shilling. The monetary policy committee Tuesday pushed up the Central Bank rate by 1.5 percentage points to 10 per cent the highest it has been in two years.
The shilling against the dollar almost hitting 100, calls for higher interest rates to sustain the market shilling that has lost about 7.5 percent against the dollar shilling. The second half of last year was looking up for the shilling after a decline in crude oil prices that fell below $50 from about $115 per barrel mid-last year. However with tourists dreading to visit the country due to insecurity, the shilling has succumbed to the pressure.
According to Kenya Bankers association Chief Executive Habil Olaka as quoted by the daily nation, the move by Central Bank of Kenya is a signal to the market on the direction interest rates should take. He also put it clear that any upward adjustment in lending rates will be determined at the next Monetary policy committee meeting and not “immediately”. The meeting will be held next month during the announcement of new Kenya Bankers Reference Rate.
The man who could leverage the shilling
After the stepping down of Central Bank’s former governor Njuguna Ndung’u, a three month search resulted to the nomination of Patrick Ngugi Njoroge as governor of the bank. Dr. Patrick Njoroge has worked as an adviser to the International monetary fund.
Mr. Njoroge advises a deputy managing director at the IMF and worked in Kenya’s Finance and Planning ministries before heading to Washington.
He has been named to lead the bank at a time when the shilling has come under heavy pressure with immense expectations that he will save the shilling once in office.