The Central Bank of Kenya has launched an effort aimed at resuscitating the weakening Kenya shilling. In the current effort, the CBK is hoping for a recovery to 155 against the US dollar from the current lows of 160.
This comes as the Shilling shows signs of stabilization against the US dollar. Over the oast few weeks, the official CBK rate has remained at 160, having peaked at highs of 161.
The commercial rates offered by banks and forex bureaus has also gone down with the margin between the official CBK rate and commercial rate being lower than Sh. 5.
For example, on Tuesday February 6, 2023, the official CBK rate stood at 160.3566. Commercially, the NCBA Bank was selling the dollar at 164 and buying at 159.
In its latest bid to tame the shilling, the CBK has been meeting top bank executives to reassure them of a sufficient supply of dollars to stop aggressive bids that have given market advantage to the dollar.
Reports say that on Monday, February 6, 2023, Central Bank of Kenya Governor Kamau Thugge and top officials from the National Treasury met bank CEOs and pledged to avail the dollars banks have been demanding to for a steady supply.
Apparently, the latest effort comes after the CBK realized that a previous attempt to stoo the slide did not work. On December 5, the CBK Governor acknowledged that the Shilling had depreciated more than it was supposed to.
This acknowledgement was followed by the raising of the Central Bank Rate (CBR) from 10.5 per cent to 12.5 per cent.
Reports in the media quoted a source who attended the meeting between the CBK and bank executives as saying that the “CBK is now looking at the CBR as a loose handbrake in terms of helping the shilling. When it realised that the shilling was not behaving accordingly, it had to figure out where the cause of the problem was.”
The source was further quoted as saying;
“That continued downfall of the shilling was basically a spiral effect of market sentiment because everyone is trading in panic mode. The meeting was to try and correct this market sentiment and to reassure the bankers that the reserves are there.”