Shilling stable despite more political jitters

Nairobi, Kenya: The National Treasury expects the shilling to remain firm against the major world currencies. This is despite the rising political temperatures in the country. The opposition has been demanding national dialogue with the ruling Jubilee administration on matters it considers to be of national importance, including the high cost of living, equitable distribution of public appointments and the rising cases of insecurity in the country.

Cabinet Secretary Henry Rotich said though the shilling could be impacted by the political tensions in the country, it will quickly revert to its strong position - mainly due to the sound macroeconomic fundamentals prevailing in the economy.

“We know our underlying economic fundamentals are strong. As long as the fundamentals are sound, we don’t see why there should be pressure on the shilling,” Rotich said Monday. ”The shilling will certainly come back to strong levels because the fundamentals are strong.”

Rotich said the country has adequate inflows, including the recently issued $2 billion (Sh174 billion) Eurobond which has the positive impact of boosting central bank reserves.

According to the World Bank, flows into Kenya’s money and equities markets has helped the local unit remain stable, despite the high current-account deficit and political uncertainty one year after the polls.

The peaceful general elections and smooth transfer of power in March last year reduced political uncertainty in the second half of 2013, further stabilising the shilling.

“Sound macroeconomic policies have enabled the economy to achieve more balanced growth in recent years, despite various domestic and external shocks,” the bank said in its latest economic update report for Kenya.

According to Central Bank, the Shilling slightly weakened against all the major international currencies Monday, trading at Sh87.87 against the dollar and Sh150.68 against the Sterling Pound.

This compares unfavourably to Sh87.70 against the dollar and Sh149.94 against the Sterling Pound during the week ending July 3, 2014. The local unit however firmed marginally against the Euro, trading at Sh119.33 compared to Sh119.73 against the Euro by the end of last week.

Kenya National Bureau of Statistics data shows overall 12-month inflation rose from 7.30 per cent in May to 7.39 per cent in June this year. This is attributed to higher fuel inflation, reflecting a rise in electricity, kerosene, diesel and charcoal prices.