Economic conditions remain far more challenging in Kenya in the pre-election period than they were in 2006-2007, as policy makers struggle to respond to another 20 percent decline in the Kenya Shilling versus the dollar this year. Business Daily reports “Kenya shilling falls to 97.20 against dollar”:
At an emergency meeting last week, the Central Bank of Kenya said it would defend the shilling. But some traders said its
absence from the market on Tuesday when the shilling fell through 96.0 for the first time showed its resolve was weak.
“The central bank needs to back up its words,” said another trader. “The trend has been talk big, don’t act.”
Some market players said, however, that if the bank simply offloaded hard currency the reprieve could be short.
“If central bank comes in (to sell hard currency), you may see a reprieve, the shilling may come off its all-time low, but
it’s not sustainable. The shilling will just slip back,” the trader said. “The shilling is on its own.”
Double-digit inflation, deteriorating balance of payments and a crisis of confidence in Kenya’s monetary policy-making
have battered the shilling this year.
Kennedy Butiko, deputy Treasurer at Bank of Africa, said the central bank might not intervene because the shilling’s demise was driven by strong demand for the dollar both at home and abroad.
Another example of the bite of food inflation, also from the Business Daily:
Kenyan households are paying the highest price for breakfast in two years after this week’s double digits rise in the cost of milk.
Leading processors of fresh milk on Monday announced a 10 per cent increase in prices, adding weight to last month’s doubling in the price of sugar and a steep rise in the cost of energy needed to prepare breakfast – the day’s most important meal.
KCC, Brookside and Limuru effected the price changes citing acute supply shortages, and the steep rise in the cost of transportation and packaging.
A half-litre packet of KCC Fresh milk, Ilara and Fresha now sells at Sh33, adding pressure to household budgets – especially at the bottom end of the income bracket.