Kenyan central bank mulls long-term measures to stabilize shilling

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Central Bank of Kenya (CBK) Governor Patrick Njoroge expressed his displeasure on some of the speculative analysis of key economic policies and effects on volatility of the Kenyan shilling and called for evidence based analysis.

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“Bigger players need to be prudent when carrying out large transactions in foreign currency. For instance, when seeking large amounts, players should seek the currency in phases over a given time period to avoid destabilizing the market,” Njoroge said during a meeting with members of Kenya Private Sector Alliance in Nairobi on Monday.

His comments came as traders said the local currency had reached the 106.40 level on Monday, close to its four-year low, when the bank intervened.

“We need to take precautions to ensure we do not destabilize the market,” Njoroge said, urging the private sector to be more cautious when borrowing large amount in foreign currency as it poses potential long term market instability.

Njoroge said access to credit can only be addressed through innovation by financial institutions, but cautioned against reliance on foreign currency denominated loans as exchange rates have a higher impact on repayments as opposed to interest rates.

He said more needs to be done to encourage the consumption of locally available goods and services as opposed to depending on imports.

The aim of the meeting was to provide members with an update on the status of the monetary policy in the country. This comes on the back of renewed interest from the private sector to improve growth and competitiveness of the economy which calls for sound monetary policy.

During the meeting, Njoroge pointed out that in order to stabilise the exchange rate, lower interest rates and boost growth, the apex bank’s highest objective remained ensuring long-term price stability.

“As part of the global community Kenya is increasingly becoming vulnerable to external shocks even though globalization also presents opportunities for the private sector,” he said.

He said those monetary policy regulatory instruments deployed by the CBK had helped it to keep month-month inflation rate below 7 percent, which was registered in June to 6.6 percent in July and 5.8 percent in August. Enditem

Source: Xinhua

Kenyan central bank mulls long-term measures to stabilize shilling

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