PANAPRESS
Panafrican News Agency
Kenya: Kenya Shilling tumbles on renewed foreign currency pressure
Nairobi, Kenya (PANA) -The Kenyan shilling dropped to a two-decade low of 100.15 against the resurgent US dollar as a result of poor export earnings and rising demand for imports, currency traders said Monday ahead of Tuesday’s meeting of the Central Bank Monetary Policy Committee.
Central Bank of Kenya quoted the shilling at 99.97 against the US dollar in early trading but traders quoted the shilling trading at 100.15, the lowest level ever since the 1990s.
“There is a tricky balance that is required between the fiscal policy and the monetary policy although there can be no silver bullet that when fired could reverse the fortunes of the shilling at the moment,” a currency trader from a local commercial bank told PANA.
Analysts expect the National Treasury to take specific steps to stop a further slide of the shilling, which has been under immense pressure from the US dollar in recent months.
The revival of the ailing tourism sector, which has nearly collapsed as a result of a series of terrorist attacks in Mpeketoni, Lamu, in the Kenyan coastal region and the drop in tea and coffee export earnings are top on the agenda of measures seen critical to save the shilling from a further slide.
Currency analysts said using foreign currency borrowed from the International Monetary Fund (IMF) or domestically to back the shilling were unlikely to save the local currency for much longer.
“Should we fail to manage the tourism sector, we will compromise a lot of factors,” said another currency trader, who was not authorized to speak for fear of antagonizing employer interests.
There is fear with the fiscal budget facing US$5.4 billion shortfall in the current 2015/16 fiscal plan, the government would be forced to borrow locally to finance key development and investment plans.
Currently, the government is involved in the construction of roads, railways and ports while also expanding generation of renewable energy to meet the demand of the local economy.
Analysts say the drop in the international crude oil prices has partly led to an increment in the demand for petroleum products, which is partly fueling the demand for other imports.
This has put too much pressure on the shilling, which has not been backed by foreign currency inflows from other sources including Foreign Direct Investments.
The shilling routinely benefits from “hot-money” from mostly the US economy, specifically from Wall Street traders who depended on the Nairobi Securities Exchange (NSE) for higher earnings.
However, the negative economic outlook caused by the series of terror attacks has made Kenya look unattractive to other investors.
-0- PANA AO/AR 6July2015
Central Bank of Kenya quoted the shilling at 99.97 against the US dollar in early trading but traders quoted the shilling trading at 100.15, the lowest level ever since the 1990s.
“There is a tricky balance that is required between the fiscal policy and the monetary policy although there can be no silver bullet that when fired could reverse the fortunes of the shilling at the moment,” a currency trader from a local commercial bank told PANA.
Analysts expect the National Treasury to take specific steps to stop a further slide of the shilling, which has been under immense pressure from the US dollar in recent months.
The revival of the ailing tourism sector, which has nearly collapsed as a result of a series of terrorist attacks in Mpeketoni, Lamu, in the Kenyan coastal region and the drop in tea and coffee export earnings are top on the agenda of measures seen critical to save the shilling from a further slide.
Currency analysts said using foreign currency borrowed from the International Monetary Fund (IMF) or domestically to back the shilling were unlikely to save the local currency for much longer.
“Should we fail to manage the tourism sector, we will compromise a lot of factors,” said another currency trader, who was not authorized to speak for fear of antagonizing employer interests.
There is fear with the fiscal budget facing US$5.4 billion shortfall in the current 2015/16 fiscal plan, the government would be forced to borrow locally to finance key development and investment plans.
Currently, the government is involved in the construction of roads, railways and ports while also expanding generation of renewable energy to meet the demand of the local economy.
Analysts say the drop in the international crude oil prices has partly led to an increment in the demand for petroleum products, which is partly fueling the demand for other imports.
This has put too much pressure on the shilling, which has not been backed by foreign currency inflows from other sources including Foreign Direct Investments.
The shilling routinely benefits from “hot-money” from mostly the US economy, specifically from Wall Street traders who depended on the Nairobi Securities Exchange (NSE) for higher earnings.
However, the negative economic outlook caused by the series of terror attacks has made Kenya look unattractive to other investors.
-0- PANA AO/AR 6July2015
