CBK official downplays severity of the shilling’s depreciation

The depreciation of the shilling is moderate compared to other currencies globally, deputy Central Bank of Kenya (CBK) governor Sheila M’Mbijewe said Tuesday.

Ms M’Mbijewe said the local currency’s weakening had been limited to 12-14 per cent this year, yet many currencies were down by a higher margin.

“What the shilling has experienced in terms of depreciation is somewhere between what the Australian and the Canadian dollar have gone through. Ours is moderate by global scale,” said Ms M’Mbijewe.

The Ugandan and Tanzanian shillings have fallen by more than 25 per cent while the Ghanaian cedi has lost more than 30 per cent in the year to date. The Turkish currency has fallen by more than 60 per cent in the same period.

Ms M’Mbijewe spoke during a Press conference called by the Cairo-based Afreximbank at the Nairobi Safari Club.

The bank is holding a seminar at the club for the next two days to discuss trade finance which relates to lending cash for export and import businesses. Kenya is at an advantage in trade finance because it has people with skills needed in structuring deals, the deputy governor said.

Afreximbank President Benedict Oramah said many African countries had difficulties in structuring deals in trade finance because they lack the requisite skills.

Dr Oramah said that Kenya was however in a better position because it had practised the business for many years. “Kenya has a long history of structured finance, especially for tea and coffee. Our experience is that people here have skills and they are using them,” said Dr Oramah.

Balance of trade

Kenya’s international trade has been growing even though exports have lagged with its value remaining behind that of imports.

Last year, exports amounted to Sh537.2 billion while imports were Sh1.62 trillion — resulting in a negative Sh1.1 trillion balance of trade.

The balance has been deteriorating over the years having risen from a negative of Sh537.4 billion in 2010.

The reason for the deterioration is largely the rising import bill which rose from Sh947.2 billion to the 2014 level of Sh1.62 trillion.

The huge import-export gap (also called current account) is widely seen as the cause of the pressure on the shilling.

As a ratio of the gross domestic product (GDP), the gap has for years hovered around 10 per cent.