Wednesday, November 28, 2007

Shillingi ya Kenya

the other day, a friend who works abroad and remits loads of money to help his extended family and friends back home (he actually runs the family remotely) asked me what magic the government had performed in the last few weeks to make the shilingi ya Kenya to rally so hard. i gave just two suggestions one being the Hellios deal and the other the telkom deal. i even suggested to him that if he thought things were bad then he should wait for the mother of all IPOs plus the aftermath. since all expectations is that the thing will be massively subscribed by foreigners. i doubt if they will want their money back when they fail to get their allocations. meaning their money will be floating around waiting for the secondary market. if that happens and the CBK holds its ground then the shilling may become ever much stronger.

the poor guy is crestfallen coz that means he digs deeper. but today on reading the business daily, it appears that my answer to the guy was rather simplistic. there may be many other issues in the cards. i have argued before that since we are a net importer of goods and services including education (imported even from Uganda) we are better off with a strong currency. but again thinking of those many kenyans in diaspora and the kenyan farmers, as well as tourism industry, one cant help but hope for the good (bad) old days when the shilling was approaching 100 to the dollar.

but what is happening to fuel? how come its not respecting our currency?

however for me sometimes, i forget about the issues business and just go to issues purely aesthetic. i think there is something soul lifting about having a strong currency or is it just me?

16 comments:

  1. Actually the dollar is doing rather poorly against all other major currencies. The Canadian dollar, for example, is worth more that the American dollar right now! This is unprecendented. The Euro is almost double the U.S. dollar value. Europeans are enjoying this. I'm on the U.S. West coast and they say this part of the country is currently experiencing record numbers of European and Asian tourists because the dollar is so cheap. It's putting quite a dent in the pocket book when sending money home :(.

    ReplyDelete
  2. kenya needs to watch out for cost of labor that what will kil the economy.
    kenyan labor is too expensive. solution is increase productivity.

    and kenyan firms need to use the strong shilling to acquire foreign firms and expand abroad.

    i think this remmitance things is overatted ive been abroad many years and now i even send less money than i used to in the 90's

    ReplyDelete
  3. I remember when I was in primo, there was a newspaper headline with a falling 1 bob picture, something about the kenyan shilling being devalued and that it was a bad thing.
    Guess that was imprinted in my mind as the basis for valuing exchange rates. I guess I share the same sentiments about the 'strong' shilling.
    I wonder whether the CBK has ensured that the country's forex reserves are less dollars & more euros at this time.

    ReplyDelete
  4. @no-spin, i know that the USD has taken a beating the world over but its also true that the shilling has strengthened against most currencies. so its not only the dollar.

    see even here http://bankelele.blogspot.com/2007/11/external-relations-diaspora-issues.html

    ReplyDelete
  5. @annon, what i never understand is the high cost of living in kenya even when the economy is doing quite well. the hyper inflation is what continues to drive the cost of labor up. on the remittances,you maybe sending less money but there are more kenyans abroad at the moment. last time when i was in dubai, i met at least 6 kenyans working in just the one small hotel i was staying in. each one of them wanted to know from me how best they could invest their money back home. they even wanted to know how best they could participate in the NSE and especially the safaricom IPO and other upcoming IPOs

    ReplyDelete
  6. @mwasjd, he he. sometimes it just feels nice to drop the 'fundamentals' and feel like the 'HE' of Hitlers Germany!

    ReplyDelete
  7. odegle, cost of labor in kenya even w/out the depreciations was higher than india or china. with a stronger
    currency - considering cost of labor is a major factor in exporting industries hwo get paid in dollars - there costs of labor have just risen 20% in the past one year. productivity is probabaly still the same unless they used teh strong shilling to buy machines and replace humans(tea harvesters) - that combined with poor infrastructure - its truly the age of turbulence.

    ReplyDelete
  8. @anon, have you heard that it costs more to transport goods from Mombasa to Busia than it does to ship those same goods from far east to the coast?

    i think we all know what to do to bring down the cost of living in Kenya, just that we have neither the leadership nor the will to do it

    ReplyDelete
  9. Somethign missing form the equiation is that - neither the Helios investment nor the Telkom payments are here yet

    ReplyDelete
  10. @Ode: read the article. I see what you're saying. I'm just wondering, how do they plan to "crack down on remittances"? Would they treat the money as income and tax the recipients?
    @annon 1: Most of the people that I know, me included, invest heavily back home - NSE, real-estate, educating relatives, etc.

    ReplyDelete
  11. Most diasporians used the 3rd of Dec as the reference date for when Safaricom IPO would open. Thus its probably no coincident that the shilling has continued to strengthen a week before then.

    ReplyDelete
  12. i think there is alot of speculation going on also the US downturn will have/is having great on remmitance remmittances fro investment i think was/is mainly coming from HELOC's an d thosre are closing or gusy are upside down on equity. so teh issue of remmitances as a factor im not too sure right now. right now TBills look great if u live in america and i think there is some specuvestors in there.

    ReplyDelete
  13. @no-spin, last year, my company started taxing all the gifts they gave us saying it was contained in the ministerial directive. going by that you never know!

    @Bankelele, quite right its all about speculation and positioning. but remember too that we also got money from the World Bank and other partners

    ReplyDelete
  14. @mainat, maybe yes. i suppose that there are many things in this. its even surprising that the elections which was expected to affect the shilling -vely has failed. or maybe it would have been even stronger without the elections?

    @annon, agreed, there seems to be many determinants

    ReplyDelete
  15. was just passing by some kenyan blogs... will read more ater

    ReplyDelete
  16. Imagine Super petrol at Sh84-85 a litre with the Ksh/US$ at Sh63-65.
    Thank your luck stars,if the exchange rate was sh70-75, petrol would Sh90-95 and the 'poor' exporters would be crying about the high cost of doing business.

    Your power bill would go up, so would spares for your ex-Japan wheels

    ReplyDelete

Note: Only a member of this blog may post a comment.