Here are our views on the news making headlines today for Kenya:
Central Bank of Kenya governor Patrick Njoroge on Monday said he was cautiously optimistic that the shilling would soon regain stability after persistent volatility that has seen it lose more than 10 per cent of its value to factors he has no control over. Dr Njoroge told the Senate committee on Finance, Commerce and Budget that the CBK has no target for exchange rate – meaning there is no red line to be crossed in the ongoing battle to stabilize the Kenyan currency.
Our View: The weakness is resulting from a couple of factors including concerns over the strengthening dollar, Greek debt crisis, as well as the gaping current account deficit. We acknowledge the CBK’s efforts to help stabilize the shilling through contractionary measures and periodic liquidity mop ups. However, the widening current account deficit will continue to pressurize the shilling exacerbating inflation rates above the government targets.