Desperate move by Central Bank of Kenya to save the Sliding shilling


It is a pity that in more than a decade, the strength of the shilling has been vibrantly stable yet in less than a year it has been experiencing a sharp slide to the dollar, a fact Central Bank of Kenya has been unable to resolve amicably. Central Bank of Kenya is the financial regulating body.

Several strategies have been put in place without much success and the latest move by Central Bank of Kenya is raising eyebrows. The move to trade foreign currency directly to some targeted segments of the economy is up for critique from several quotas. The move by Central Bank of Kenya is likely to be a stimulant to other worse abuses.

Central Bank of Kenya in its desperate move to save the sliding shilling might have not weighed its options critically, living room for speculation, that some segments might take advantage be favored a fact that some investors fear.

 The reign of the current Central Bank of Kenya governor

Since 2002 Kenya has been enjoying a favorable economic stability compared with other East Africa economies.  Currently the East African currencies are steadily gaining strength against the Kenyan currency despite the fact that Kenya’s economy remains the strongest in the region.

Central Bank of Kenya governor Prof. Njuguna Ndung’u took charge of CBK, sometimes in March of 2007.Since then, his tenure has not been very remarkable. In 2007 statistics reveal that the shilling lost 43 per cent of its value. Since January 2011 the shilling has further lost its value with about 24 per cent. The trend is not very appealing in our already strained and diminishing economy.

However, the Central Bank of Kenya governor is a man who is thought to have the wits and the qualifications to turn around the economy and put in place strategies and measures that can sustain the economy and stabilize the currency from further fluctuations. This has not been seen yet.

The question is if the governor of the Central Bank of Kenya is equal to the task, or if he knows something that we don’t know yet? It is not only fair, but right, for us to get an honest and since statement of explanation from the Central Bank of Kenya to the current state of affairs. In addition the Government of Kenya through the Executive should also be in a position to protect its citizens from the rising cost of living.

 The Central Bank of Kenya must play its role well

 

It is embarrassing to see the Central Bank of Kenya, loudly disguise itself in blame games rather than assert its authority to avert the situation. So what action is being taken by the Central Bank of Kenya to reverse the trend? Could it be possible that some politically vested interests or unscrupulous traders are playing the cards behind the scenes?

The Central Banking of Kenya has been on the forefront in shouting loudly to castigate and to blame commercial banks of withholding the dollar from the market a move that is seen as cowardly. Central Bank of Kenya should crack the whip and stop these banks from manipulating citizens who have constantly bore the brunt of a high cost of living.

The shilling keeps dictating every other aspect of our livelihood and any move to blunder on decisions is a catastrophe to the entire pillars of economic growth and the achievement of the vision 2030. This dilemma of the free fall of the shilling should be treated with a lot of seriousness and as an emergency by the Central Bank of Kenya and other stakeholders.

The Central Bank of Kenya boss should therefore strive to assert his authority on commercial banks that are subordinates to the Central Bank of Kenya. If he continues the blame game it is tantamount to admission that he is a failure and that he can tolerate unethical and practices that promote impunity.

My opinion would be that the government should take a serious look into the current state of affairs of the Central Bank of Kenya, and probably vouch for a replacement of the CBK boss as a first bold step to rectify the situation and to getting down to the root cause of the problem. If not, invoke any laws that will determine monetary policy direction on the Central Bank of Kenya.

Will the proposed strategies by the Central Bank of Kenya help?

The Central bank of Kenya proposes to sell foreign exchange directly to targeted segments of the economy. It is said that this measure is seen to be targeting the public as the beneficiaries. Many observers feel this measure is bound to attract massive abuse.

The Central Bank of Kenya also resorted to deal with overnight interests rates. The overnight interests were being published on a daily basis. This was to help influence the market. This strategy did not work out really well in preventing the slide of the shilling to the dollar.

Central Bank of Kenya boss seemed to re assure markets that CBK was committed to a floating exchange rate stressing the fact that he was not contemplating capital controls.