Is dollar good for Kenya economy?

One of the most unpredictable factors in international transactions in the past few years has been the strength of the US dollar.

Is the strong American dollar good or bad for the Kenyan economy?

Any credible economist would tell us it is neither good nor bad for the economy as a whole.

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Some sectors of the economy benefit from a strong currency, but many others do badly.

For example, most importers, including manufacturers and retail traders, gain when the dollar is weak or the shilling is strong in relation to other currencies.

Most parents sending their children to start abroad pray that the shilling remains strong as it is now in relation to the US dollar.

However, many exporters, including hotel owners and tourist operators, are likely to receive diminishing returns as the dollar weakens or the shilling appreciates.

My local currency, the Australian dollar, has appreciated considerably in relation to the American dollar, pound, euro and yen.

For instance, it has moved from 65 cents to 92 cents American within two months.

The Australian central bank added fuel into the rising Aussie dollar when it increased the cash rate by 0.25 per cent two weeks ago, thereby becoming the first among the G20 economies to put up interest rates since the global financial crisis started.

As most Australian universities rely on foreign students, including a large number from Kenya, to make up for shortfalls in their budgets, they are likely to suffer in the coming months as the strong Aussie dollar renders university education in the US, UK and other countries more competitive.

Despite the pain a weak US dollar might cause in some parts of the world, I believe it is necessary and inevitable.

It is necessary because without it, the US economy will not recover quickly.

There is no more fiscal and monetary stimulus available to jumpstart the economy.

The decline of the US dollar has been inevitable because various countries have been diversifying foreign exchange reserves away from US dollars.