By Duncan Miriri
NAIROBI (Reuters) -Kenya’s central bank is “OK” with the foreign exchange market due to adequate liquidity and its own close monitoring of trading to ensure that discipline prevails, the bank’s governor said on Wednesday.
The shilling has hit a series of record lows against the dollar this year, due to pressure from high oil prices, but it is still down just 1.3% for the year so far, according to central bank data, outperforming peers such as the Zambian kwacha and the Ghanaian cedi.
“We are feeling OK in terms of operating the market. There is liquidity in the market,” Patrick Njoroge told a news conference.
Policymakers left rates unchanged for the 13th consecutive meeting on Tuesday, saying inflation expectations were anchored within the government’s target band.
They assessed that the Russia-Ukraine crisis was unlikely to have a significant impact on Kenyan economic fundamentals, since both countries are not major trading partners, the central banker said.
Russia and Ukraine account for 1.5% of Kenya’s total exports, he said, and 2.7% of all imports.
The economy is estimated to have expanded by 8.0% last year, Njoroge said, adding growth would moderate to 5.9% this year.
The forecasts are unchanged from those the bank issued in January, but Njoroge said it could revise this year’s outlook when more information becomes available.
Kenya has absorbed the oil price shock well so far, he said, thanks to its flexible foreign exchange policy and the government’s move to subsidise prices when they started jumping in the second half of last year.
However, the oil subsidy programme must only last a limited time, the governor said, to prevent the country from facing fiscal issues that usually arise from prolonged subsidies.
The burden of reducing oil prices lay with developed economies, Njoroge said.
“Prices at $100 a barrel are completely beyond the realm of understanding,” he added.
(Reporting by Duncan Miriri Editing by George Obulutsa and Mark Potter)
