Shilling overvalued by 30 per cent - Amana Capital

In Summary

• IMF made a similar claim in 2018.

• CBK governor Patrick Njoroge refuted those claims, stating that IMF unfairly valued the shilling.

Amana Capital chief investment officer Reginald Kadzutu.
Amana Capital chief investment officer Reginald Kadzutu.
Image: VICTOR AMADALA

Kenya is operating a managed shilling than a free float currency, running a risk of making its exports more expensive.

Speaking while unveiling a report that unpacks what is ailing Kenya's economy, Amana Capital chief investment officer Reginald Kadzutu said the shilling is overvalued by 30 per cent.

He explained that the consumer price index which was at Sh97 in 2009 has since risen to Sh192, meaning that Kenyans are spending Sh192 to buy what could be bought at Sh100 ten years ago, translating to 50 per cent devaluation of purchasing power.

 

''The shilling's exchange rate which was at 72 against the dollar in 2009 is now at Sh100. This represents 20 per cent devaluation, meaning the shilling is overvalued by 30 per cent, '' Kadzutu said.

Dubbed 'Kenya's Economic Puzzle', the report supports IMF's views on the shilling which were disputed by the Central Bank of Kenya.

Last year, the international lender accused Kenya of propping up its shilling, saying that it is overvalued at by over 17 per cent.

Even so, CBK governor Patrick Njoroge refuted those claims, stating that IMF unfairly valued the shilling.

He said that the Shilling's stability is supported by stable microeconomic fundamentals and that the value is of free float nature.