A Parliamentary committee has asked banks to help stabilise the depreciating shilling.
The National Assembly’s Departmental Committee on Finance and National Planning chaired by Molo MP Kuria Kimani underscored the crucial role of the 46-member Kenya Bankers Association (KBA) in helping mitigate the situation which threatens the economy.
Kimani who was speaking during an engagement with the association members, the Committee said banks can be able to assist the country to ensure that the shilling starts to gain.
“As a Committee, we are concerned that the Kenyan shilling has continued to plummet against the US dollar and other major currencies. We would like to urge you to help mitigate the situation,” he added. Last week, Fitch Rating warned that if the exchange rate depreciates significantly from current levels, it could add to Kenya’s debt servicing challenges, particularly in the near term.
Credit rating agency
The Hong Kong-based credit rating agency in the latest note on Kenya expressed concerns about the weakening shilling, saying it has dropped faster than its forecast of 148 units against the dollar by the end of the year.
On Friday, the shilling hit a new low of 152.08 units against the greenback, moving closer to the government’s projection of 155 by the time of repaying part of the $2 billion inaugural Eurobond taken in 2014.
During the meeting, Committee members faulted some banks for exacerbating the problem through hoarding of dollars. According to the MPs, this has posed a big challenge to importers. The weakening shilling has also led to an increase in the cost of fuel prices in the country.
Kenyans were yesterday waiting with bated breath to know the new fuel prices the Energy and Petroleum Regulatory Authority (EPRA) was gearing up to announce.
During the October review, the agency raised the price of petrol by Sh5.72, diesel by Sh4.48, and kerosene by Sh2.45. Following the adjustments, petrol retailed at Sh217.36 per litre, diesel at Sh205.47 and kerosene at Sh204.46 per litre in Nairobi.
Last month, the government asked Kenyans to brace for difficult times as fuel prices could soon exceed Sh300 per litre.
When he was confronted with the issue during a Kenya Kwanza Parliamentary Group meeting, President William Ruto said his “hands are tied.” In his submissions, Central Bank Governor Kamau Thugge told legislators that the demand for foreign exchange had outweighed supply in most months leading to the depreciation of the shilling that has since officially crossed the Sh150 mark against the US dollar.
He argued that the Kenyan shilling had been overvalued as the country fought to maintain an artificially strong exchange rate.
Hold deposits
The Association led by the Chief Finance Officer, Kennedy Mutisya said that they were not to blame on the matter as they only hold deposits on behalf of their customers.
He said that the depreciating shilling was a result of the dynamics of demand and supply for the US dollar especially. The association noted that the best remedy would be for the government to urge those hoarding dollars for speculative purposes, to release them.
Members of the association who were meeting the Committee to review the performances of the banking sector in the wake of hard economic times called on it to make legislative interventions to expand the tax base rather than rely on the traditional contributors to shoulder the tax burden.
BY MERCY MWAI