National Treasury Cabinet Secretary Njuguna Ndung’u has claimed that it is not a bad thing that the Kenya Shilling is on a free fall. CS Njuguna Ndung’u claims that this is because the ongoing depreciation is an act of the shilling finding its true value.
He made the remarks as the Kenya Shilling officially touched an all time low 153 against the US Dollar as local commercial banks rate it at lows of 158 to the US Dollar.
The cabinet secretary further denied that the shilling is on a free fall. “I have seen some papers say a free fall exchange rate is bad as the currency is depreciating. No, it is not bad for the currency to depreciate, it is adjusting to its true value,” CS Njuguna Ndung’u said during an interview with local radio station Spice Fm.
“The exchange rate is market determined. It has to reflect the scarcity or abundance of what is market. It is following reality because it was for a long time held and not allowed to adjust,” he said. “You cannot have a free fall. The exchange rate is a relative price. It’s a ratio of one price to another price.”
This is the latest government admission that the Shilling is on its own as the government has no solution to tame its slide.
As has become the habit of the current government, CS Njuguna Ndung’u blamed the previous administration over what the government has been alleging as artificial management of the local currency.
“We went through a period of managed exchange rate. When you have a floating exchange rate, you cannot then intervene in terms of the market process,” he said.
The cabinet secretary further alleged that former President Uhuru Kenyatta’s government invested heavily in infrastructure projects. In turn, this affected the non-tradable sector as they could not be traded internationally.
“We went through a period of managed exchange rate and when you go through it you cannot intervene in terms of the market process. We were heavily investing in infrastructure projects in the process affecting the non-tradable sector,” he said.