Treasury Cabinet Secretary John Mbadi has said the government would not allow the Kenyan currency to strengthen further against the United States dollar.
Mbadi, while appearing before the Parliamentary Budget and Appropriations Committee on Thursday, March 27, noted that a stronger shilling could discourage exports.
According to the finance minister, fewer exports could significantly impact foreign exchange reserves and expose the country to economic vulnerability.
“We cannot allow the shilling to appreciate too much; we assess that the shilling at 130 units is the most reasonable for our economy because if you make the shilling too strong, you discourage exports,” Mbadi said.
“The moment you discourage exports, you will not have foreign exchange reserves, and you will be more exposed because now you cannot even pay your debts,” he added.
He further revealed that the government has been attempting to balance the local currency’s rate against the dollar to ensure it favours both exporters and importers.
It is of significance to note that a stronger currency reduces the competitiveness of exports in the international markets but makes imports cheaper.
On debt management, the CS said that the local currency had cut the country’s external debt by Ksh1 trillion from Ksh6 trillion due to its appreciation against the dollar.
Mbadi also noted that the government had taken other stringent measures to curb the growing debt, including securing cheaper loans to repay the more expensive ones.
“By the shilling just appreciating, that debt has come from Ksh6 trillion to Ksh5 trillion; the effect of this is that you pay less of the principal amount, and the interest charged is also less,” the finance minister noted.
"You cannot just wake up one morning and decide to pay all your debts; it is not practical, so whatever debt you take must be cheaper than what you had for you to retire the old one," he added.
The CS reiterated that the government would be seeking more domestic loans since most multilateral lenders had begun reducing their loan offers to Kenya.
Ruto Arrives in Rome for Pope Francis Burial News Just In
