By Mzalendo Contributor – Moreen Majiwa
- The Kenyan Shilling has fallen 25% percent against the dollar since January
- Inflation is up by 17.1%
- Food inflation is up by 24.4%
- Transport inflation is up 24.8%
- Economic Growth slowed to 4.1%
- KPLC has raised the price of electricity per unit
You’d be hard pressed to find a Kenyan on the street that would say they have not been affected by the food costs, fuel costs, or the general cost of doing business. Yes, there are external factors that have affected the value of the shilling – the Euro zone crisis, persistent drought in the region, volatile oil prices etc. However internal factors i.e. the effect of poor policy, planning and practice are also to blame for the declining value of shilling. An article in the Nation names the Ministries of Industrialisation, Agriculture, Energy, Trade, Tourism, Planning and Vision 2030 and the Kenyan Consumer playing a large part in where we are economically.
The policy makers’ response? Parliament’s Finance, Planning and Trade Committee has proposed the government attempt to obtain ‘emergency balance of payment support from the International Monetary Fund and other development partners.’ According to the committee’s head, Nambale MP Chris Okemo, ‘this is the only way to stem the excess volatility between the shilling and the other currencies’.
The committee has also summoned the Central Bank Governor seeking an explanation for the rapid decline of the value of the shilling. In September President Kibaki assented to the Price Control (Essential Goods) Bill. The Act allows the government to set maximum prices on essential goods i.e. maize flour, cooking oil, sugar etc. The 2011/2012 Budget proposed the removal of excise duty kerosene, and essential goods. I’m yet to see and or hear anyone speaking of the benefits of these either of these measures. The President has reached out to the International Monetary Fund for financial aid. The Prime Minister has set up a committee to ‘save the shilling’. The committee formed this month is comprised of officials from the Office of the President, the Treasury, Central Bank of Kenya, the Ministry of Planning and private sector executives. The Parliamentary Committee on the Budget headed by MP Elias Mbau is seeking a 30 billion shilling economic stimulus package to cushion the poor against the effect of inflation and the falling shilling. The MP has suggested that the 30 billion shilling cash injection be raised through a ban on non-essential travel by public officers overseas (yes please), and additional taxes for the rich and sectors with high margins. I wonder if this plan includes having MPs remit their taxes in full. The Central Bank of Kenya seems to be more cautious in its limited interventions seeming to prefer to wait and see if the market will self-correct.
The thing is a lot of these interventions have occurred in the last two months despite the fact that problem seems to have become noticeable in January 2011 and probably started way before. Are the interventions adequate or is this a case of too little too late? Is the government doing enough to rectify the situation?