Rotich downplays shilling fall as currency hits new low

Treasury secretary Henry Rotich has downplayed the effects of a volatile shilling as the local unit trades at a three-year low, raising the cost of imported goods.

Mr Rotich told the Parliamentary Budget Committee on Monday that the shilling had fared better than other major currencies that have shed more against the strengthening dollar.

“The Kenyan shilling was noted to have depreciated by five per cent as opposed to other international currencies which depreciated by 10 per cent,” said Mr Rotich. “However it was expected to stabilise in the medium term.”

Data from Reuters shows that the euro has strengthened by 4.3 per cent against the dollar since end of January, the British pound has shed 1.3 per cent while Japanese yen has shed 4.9 per cent. Kenya has lost  6.9 per cent to the greenback in the period.

The shilling was on Thursday trading at 97.80/98.0 to the dollar —a level last seen in late 2011—partly due to the global strength of the dollar and plunging foreign exchange inflows from tourism in the wake of terror attacks. This has prompted the Central Bank to bring forward its next monetary policy committee (MPC) meeting by four weeks to June 9.

READ: Import costs set to rise as shilling hits new three-year low

The bank said on its website that the MPC, which meets to set rates every two months, would hold its next sitting on June 9 but did not give a reason for the change of dates.

The shilling has been under pressure since the beginning of the year due to falling revenues from tourism, tea and horticulture— the key foreign exchange earners — amid concerns over a rising import bill.

There are fears the fall could push up the cost of living in a country that largely depends on imports for its consumer and capital goods, especially fuel and industrial raw materials.

Tourism, once the highest foreign exchange earner, has borne the brunt of terror attacks that has prompted Western countries to issue travel alerts.

This has cut foreign tourist arrivals over the past year and led to the closure of more than 40 hotels at the Coast due to low bed occupancy. The number of international visitors dropped to 1.3 million from 1.5 million in 2013.

The effects of the strengthening dollar have already been felt at the pump after the energy regulator this month raised fuel prices to the highest level this year.