Sunday, July 08, 2007

Diaspora impacting the Shilling

Another group trooped to the Governor of the Central Bank, lamenting about the strength of the Kenya shilling against the dollar, and its negative impact on exports - asking for intervention, or exchange rate controls to weaken the shilling.

But is it possible and how? According to economist Dr. David Ndii, the Central Bank is largely unable to control currency and inflation rates. Inflation because a large part of the economy is informal (and unbanked), and the shilling because of remittances.

Remittances grew from ¼ to almost 1/3 of export earnings and grew by 43% compared to exports which grew by 13% from 2005 to 2006.

So unless authorities crack down on money transfers, or asks Kenyans in the diaspora to channel their funds through more productive avenues and investments, this is likely to continue. And with Equity bank and Safaricom poised to enter the international money transfer business, the reach of the diaspora to rural Kenya is about to take another leap forward.

Ultimately we all hope the strong shilling can lead to a lower fuel bill for the country ad petroleum prices impact so many aspects of the economy including the cost of production for exporters.

most from the daily papers this week

Executive secretary at the Africa capacity building foundation based in Zimbabwe. D/l is 31/8

Dozens of executive positions at the new Africa financial corporation to be headquartered in Lagos. . Details at KPMG site and d/l is 15/7

Baker tilley merali CPA: audit manager, senior audit professionals. Apply to

Senior advisor Kenya at Danida. Apply online

Governance advisor Kenya, at DFID - the British government department for international development. Apply to by 23/7

Elizabeth Glaser pediatric aids foundation: finance/HR manager, finance/admin assistant. Apply to by 23/7

Non executive board chairman at the Emerging Africa infrastructure fund. D/L is 31/7

Express advertising: account director, PR & events manager, media manager. Apply to by 19/7

First Community Bank - Kenya's first Islamic bank. Vacancies include head of risk management, head of corporate banking, head of retail banking, head of operations, head of treasury. Apply to by 20/7

Industrial promotion services aka IPS: business process re-engineering managers /officers and
food sector business development officers. Apply to by 30/7

Kenya airways has finally embraced the online application process. Current vacancies include IS officer, automations service manager, licensed engineer, technicians as well as pilots and cabin crew.

General manager at Kisii bottlers limited. Apply to by 18/7

Managing editor - quality & product development at KTN. d/l is 12/7

International jobs can be viewed at the Kenya Ministry of Foreign Affairs website

Nation media group. Writers, also Internet sub editor.

TNT international: sales account manager, sales administrator, IS administrator. Apply to by 20/7

Senior malaria advisor at USAID. check online and d/l is 20/7

World Bank young professionals program d/l is 15/7


Anonymous said...

The pressure on the Ksh will ease once the government starts to spend parts of the Kshs 600 billion+ budget

Kenyan consumers will use most of this money to buy foreign goods such as cars, tvs and computer

Otero said...

oil/petroleum importers are happy with a stronger shilling. But you can never count on these guys to reflect this in their pricing.

All in all, a correction will def take place on nearing the elections.

Anonymous said...

I just don't get this whole shilling discussion.
Isn't kenya a net importer?

The only people feeling pressure are exporters. And they should have seen this comming and accommodated for it in pricing and currency hedging. I mean that is just international business 101.

Anonymous said...

Since the $1 dropped to Ksh. 66 from Ksh 73 about 1 year ago, how has the price of imported stuff been affected?

As otero says, seems to me that the local consumer never really sees an effect in these drops. Who has an idea how this can happen? How come the Kenya econmomy does not follow well understood laws?

The National Centre for Research on White Collar Crime said...

I have no problem with the strengthening of the Kenya Shilling...the British pound was once 20 bob...there is lots of ground to make up.

E-Nyce said...

The Kenya Ministry of Foreign Affairs website goes to a blank page.

To quote one of my favorite TV characters: "What? Are we surprised by this?"

Anonymous said...

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MainaT said...

In economic theory, CBK could intervene via OMO where it buys up foreign currency-waste of time. Or it could reduce interest rates driving inflation higher or could institute exchange controls possibly leading to another Goldenberg. Ways out of this would be to import more thus generating demand for fx-but we want a strong exporting economy so we are a catch-22 situation.

Anonymous said...

most currencies have strengthened against the dollar anyway so i think this should balance our against export partners. though export are priced in US dollars the conversion to local currencies should reflect the gain against the dollar.

the biggest issue perhaps is cost labor in dollar terms has gone. literally it means that kenyan workers have gotten a raise - without necearily increasing productivity.

Also the gains off the dollar are being offset by poor infrastructure in a world of strong currencies and low trade barriers infrastructure and productivity are key.

speaking of which kibaki is one lucky president - reaaly if u analyze it there has been no fundamnetal economic policy change between him and MOI just that the economy is being carried by global trends.

Steve said...

hi Bankelele,

Quick question: any links with hard numbers on the remittances numbers that you mentioned?

E-Nyce said...

De-link the dollar and link onto the euro?

bankelele said...

alexcia: About half of development funds budgeted are never spent.

Otero: True. Fuel prices are up over 10% this year

don: there's some hedging/futures contracts in the flower export business

mwalimu: Not seen anything cheaper, as fuel prices have been rising

ncrwcc: Not likely though it would be something to see. The US$ was 7 bob!

E-Nyce: Minsitry site is back up though I haven't seen the jobs
- The $ is still the preferred currency for business & travel in this part of Africa. Euro needs some marketing for wider acceptance

Global Career Company: best wishes, you can e-mail such info direct

MainaT: Intervenetion will have to involve forex bureaus, western union and other remittance co's

Steve: Dr. Ndii mentioned that net remittance rose from $1,264m in 2005 to $1,812m in '06 while exports rose from $5,458m to $6,167m

Anonymous said...

Banks.. are the futures traded in the market? Where are they traded?

What ever happened to OTC? or did it die under the safaricom IPO shadow?

Steve said...

Almost $2bn in remittances.


This now begins to make me wonder how I can make some money out of this whole remittances thing ...

Thanks for the taking the time to respond banks.

- Steve


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