Kenya: Strong currency worries business-Companies

(SomaliNet) Kenyan companies say the strong shilling is hurting both exporters and businesses competing with cheap imports in the local market, with some saying the current exchange rate amounts to a national crisis.

Meanwhile, in early May, Central Bank Governor Njuguna Ndung\'u explained the strength of the national currency as being due to a three-year financial boom and growth in sectors like agriculture and tourism.

However, business executives told a conference this week that the shilling has gone past their pain threshold, hurting their competitiveness abroad and lately also in the local market, as imports become cheaper and displace locally made goods.
\"What we are talking about in terms of exchange rate is a national crisis,\" said Peter Muthoka, managing director of Sasini, a tea, coffee and horticulture producer and tourism operator.

\"Whereas we shouldn\'t go back to the days of exchange rate controls, there must be a happy medium between what the exporters are getting and what the importers are getting,\" Muthoka told reporters at a business conference on Thursday.

\"We have always said, something up to about 74 to 76 shillings is extremely good.\"

The shilling gained about four percent against the dollar since the beginning of the year and now trades at just below 67 to the dollar.

The currency floats freely, though the central bank can intervene if it sees signs of speculative moves in the exchange rate.

An association of horticultural produce exporters said its members had suffered losses of four billion shillings ($59,90 million or about R422-million) in 2006, largely due to the weakening of the dollar against the Kenyan currency.

In early June, the treasury secretary said that the shilling\'s appreciation is expected to subside in the 2007/08 (July-June) fiscal year as heavy infrastructure spending would raise demand for foreign-made equipment.

The central bank has said in the past that a strong shilling was good as it helped to import capital equipment at lower costs and that it would only intervene in the market to weaken it if there was evidence of speculation.

But manufacturers said imports of capital equipment are often a one-time expenditure and as such better terms of such purchases cannot offset the losses sustained by exporters and those competing with imports in the local market on a daily basis.

\"The argument that we have heard here... cannot be sustained,\" said Betty Maina, chief executive of Kenya Association of Manufacturers. \"You don\'t buy machines every day.\"-Reuters