The government’s decision to cut down on the politicking and instead team up with the private sector to combat inflation seems to be paying off. As recently observed the shilling appears to be stabilizing fairly well, and seems to be growing stronger every day. We say this in spite of the resent slight increase in the Shillings exchange rate against the dollar which was occasioned by the anticipated end of month demand for the dollar by the importers. The Shillings still proves to be a force to reckon with.
In January 2009, the inflation rate stood above the 30% mark and it has now significantly dropped to 16.92% . Some of the measures that the Central bank put in place include
Measures taken to stem off inflation include:
- ·The Central Bank’s decision to raise its policy rate and to help absorb liquidity and discourage excessive credit growth and demand for foreign exchange.
- ·The government’s decision to avoid local borrowing and thus benefit from lower interest rates in Europe and the United States and also avoid crowding the private sector here from borrowing.
- The mopping up of the shilling from the money market through repurchase agreements that support the local currency. Some of these repurchase agreements include the auctioning of government bonds.
- Increasing inflows into the Kenyan debt market from offshore funds seeking to tap the prevailing high yields on government securities.
These plus, several other measures, have helped lower the inflation rate in Kenya and from the International Monetary Fund (IMF) forecast, inflation is likely to decline to 7% by 2012/13 from the current 16.2% in 2011/12. This verdict will most definitely improve Kenya’s economic image as it prepares to arrange for a syndicated loan of $600 million from several global banks in the next two weeks, money meant to cover the budget deficit.
