CBK hits out at IMF for saying Kenya shilling is overvalued

[Geza Ulole]

CBK hits out at IMF for saying Kenya shilling is overvalued
WEDNESDAY, NOVEMBER 28, 2018 15:35

A forex bureau in Nairobi. Kenyan currency remains range-bound against the dollar. FILE PHOTO | NMG

The Central Bank of Kenya (CBK) governor Patrick Njoroge has reiterated that the Kenyan shilling is properly valued and that its value is only dependent on the forces of demand and supply.

Dr Njoroge said shilling's value against other currencies, such as the US dollar, has no any fundamental miscalculation as has been suggested by International Monetary Fund and other analysts.

“There has been a lot of discussion about our exchange rate assessment and the exchange rate policy--- We don’t have a view about the level or direction of the shilling. We let the market drive the price of the shilling,” he said at a post-Monetary Policy Committee meeting briefing in Nairobi.

‘We only intervene to minimise volatility in the market since volatility can be destabilising in the foreign exchange market and other areas of the market.”

Less than 5pc variance
He said that CBK relies on several approaches in doing this and said that the level of any misalignment of the shilling, if any, is in the region of five per cent.

The governor told the press that CBK will soon upload on its website a comprehensive explanation of the approaches it uses on the shilling, adding that any intervention measures are only disclosed to the market at an appropriate time not to cause jitters.

The shilling has come under spotlight since September when IMF terminated Kenya’s access to a Sh152 billion ($1.5 billion) precautionary loan facility.

CBK hits out at IMF on value of Kenya shilling

 

[Geza Ulole]

IMF Using Kenya as FX Formula ‘Guinea Pig,’ Governor Says
By
Adelaide Changole
28. November 2018, 09:59 MEZ Updated on 28. November 2018, 13:54 MEZ

• Lender’s assessment of shilling value is flawed, governor says
• Currency is overvalued by less than 5% against dollar, he says

Patrick Njoroge Photographer: Luis Tato/Bloomberg
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https://www.bloomberg.com/quote/INDU:IND
Kenya’s central bank reiterated that it only intervenes in the foreign-exchange market to minimize volatility, criticizing an International Monetary Fund assessment that the shilling is highly overvalued and the unit is no longer floating.

The shilling is overvalued by less than 5 percent against the dollar, Governor Patrick Njoroge said. That compared with the IMF’s assessment of 17 percent. The lender used a new methodology that’s only been in place since 2015 to reach that conclusion, Njoroge said. The formula was created for advanced economies and only now being applied to emerging markets despite its “well-known” weaknesses, he said.

“We are being used as a guinea pig on the External Balance Assessment-Lite methodology,” Njoroge told reporters in the capital, Nairobi. “The methodology was used in a black box environment. Data went in, whatever popped out was what was presented and obviously that was something we would not agree with.”

Kenya uses “standard approaches” such as the Purchasing Power Parity, Elasticities, Real Equilibrium Exchange Rate, because one methodology is not sufficient to give a holistic picture, he said.

“Our own calculations support the view that there is no fundamental misalignment reflected in our exchange rate and the shilling reflects the real and true value,” Njoroge said. “We have a flexible exchange-rate regime and we don’t have a view on the level and direction of movement.”

‘Aggressive Intervention’
The shilling was steady at 102.68 against the dollar by 3:30 p.m., down 2 percent from a 99.87 peak on July 16. For most of 2018, the unit has been Africa’s best performing currency and has gained 0.6 percent this year, according to data compiled by Bloomberg.

That performance has been underpinned by frequent central bank intervention, said Jared Osoro, director for research on financial markets and policy at the Kenya Bankers Association. Foreign-exchange reserve levels dropped to $8.03 billion last week from a record $9.51 billion in April, according to the central bank.

“The prevailing market conditions follow aggressive central bank interventions in the form of market participation,” he said in a statement on the lobby group’s website.

Gathering Pace
The central bank says economic growth this year could outpace an expected 6.2 percent after agriculture and remittances expanded at a much faster rate. It is likely to raise the outlook after gross domestic product statistics for the third quarter are published, Njoroge said. East Africa’s biggest economy posted 5.7 percent and 6.3 percent expansion in the first two quarters of the year respectively.

Exports increased by 7.7 percent in the year through September, Njoroge said, while remittance inflows totaled $2.23 billion in the first 10 months, a 42 percent increase from a year earlier.

“There is a favorable outlook for 2018,” Njoroge said.

(Updates with lobby group’s comments from seventh paragraph.)

Bloomberg - Are you a robot?

 

[kennedy0000]

I think the Kenyan governor sounds believable..
Especially compared to the governor of our favorite LDC who makes outright lies like which country has the higher forex reserve.. without even blinking, then runs away to avoid questions from reporters.

 

[chase amante]

Hahah

 

[Arnold mrass cannambo]

I like the transparency of the Kenyan government. I know the US can't stand the rising Shilling!

 

[joto la jiwe]

Hahahaha, IMF is a neutral international financial institution, doesn't have any reason why it should feel jealous. Why IMF is always talk negatively about Kenya?

I like the transparency of the Kenyan government. I know the US can't stand the rising Shilling!

 

[Janerose mzalendo]

Lol.Huyu joto la jiwe.Does it talk positively about Tz?
Lol.

 

[Janerose mzalendo]

IMF Using Kenya as FX Formula ‘Guinea Pig,’ Governor Says
By
Adelaide Changole
28. November 2018, 09:59 MEZ Updated on 28. November 2018, 13:54 MEZ

• Lender’s assessment of shilling value is flawed, governor says
• Currency is overvalued by less than 5% against dollar, he says

Patrick Njoroge Photographer: Luis Tato/Bloomberg
LISTEN TO ARTICLE


2:51
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In this article
Bloomberg - Are you a robot?
Kenya’s central bank reiterated that it only intervenes in the foreign-exchange market to minimize volatility, criticizing an International Monetary Fund assessment that the shilling is highly overvalued and the unit is no longer floating.

The shilling is overvalued by less than 5 percent against the dollar, Governor Patrick Njoroge said. That compared with the IMF’s assessment of 17 percent. The lender used a new methodology that’s only been in place since 2015 to reach that conclusion, Njoroge said. The formula was created for advanced economies and only now being applied to emerging markets despite its “well-known” weaknesses, he said.

“We are being used as a guinea pig on the External Balance Assessment-Lite methodology,” Njoroge told reporters in the capital, Nairobi. “The methodology was used in a black box environment. Data went in, whatever popped out was what was presented and obviously that was something we would not agree with.”

Kenya uses “standard approaches” such as the Purchasing Power Parity, Elasticities, Real Equilibrium Exchange Rate, because one methodology is not sufficient to give a holistic picture, he said.

“Our own calculations support the view that there is no fundamental misalignment reflected in our exchange rate and the shilling reflects the real and true value,” Njoroge said. “We have a flexible exchange-rate regime and we don’t have a view on the level and direction of movement.”

‘Aggressive Intervention’
The shilling was steady at 102.68 against the dollar by 3:30 p.m., down 2 percent from a 99.87 peak on July 16. For most of 2018, the unit has been Africa’s best performing currency and has gained 0.6 percent this year, according to data compiled by Bloomberg.

That performance has been underpinned by frequent central bank intervention, said Jared Osoro, director for research on financial markets and policy at the Kenya Bankers Association. Foreign-exchange reserve levels dropped to $8.03 billion last week from a record $9.51 billion in April, according to the central bank.

“The prevailing market conditions follow aggressive central bank interventions in the form of market participation,” he said in a statement on the lobby group’s website.

Gathering Pace
The central bank says economic growth this year could outpace an expected 6.2 percent after agriculture and remittances expanded at a much faster rate. It is likely to raise the outlook after gross domestic product statistics for the third quarter are published, Njoroge said. East Africa’s biggest economy posted 5.7 percent and 6.3 percent expansion in the first two quarters of the year respectively.

Exports increased by 7.7 percent in the year through September, Njoroge said, while remittance inflows totaled $2.23 billion in the first 10 months, a 42 percent increase from a year earlier.

“There is a favorable outlook for 2018,” Njoroge said.

(Updates with lobby group’s comments from seventh paragraph.)

Bloomberg - Are you a robot?

Lol. Kwanza nasubiri GDP statistics. Waliosema Kenya haijafikisha $80b watapata taabu sana. Right now it is $85b .

 

[kennedy0000]

Hahahaha, IMF is a neutral international financial institution, doesn't have any reason why it should feel jealous. Why IMF is always talk negatively about Kenya?

Because we've been showing them the middle finger and borrowing from China instead.

 

[JKasuku255]

Because we've been showing them the middle finger and borrowing from China instead.

Tanzania: China Is a True Friend of Tanzania

Photo: Daily News Tanzania

President John Magufuli at the ceremony to inaugurate the U.S.$41 million state-of-the-art library at the University of Dar es Salaam,
By George Cleophace Muntu
MOST Tanzanians under the age of 35 do not know the basis of friendship between China and Tanzania.
Most of them know the China that is misinterpreted by some sections of the media and are unaware of the tremendous support that China has given to Tanzania and other African nations.
The little understanding in terms of aid and close relationship between Tanzania and China is largely influenced by the absence of civil society agency that tells Tanzanians about China's aid to Tanzania.
These aids have been in the categories of infrastructure building, education, health, tourism, agriculture, etc.
The latest example of China's contribution to Tanzania is the university library - the University of Dar es Salaam Library. Covering an area of 4.7 hectares and a building area of 20,000 square metres, the UDSM Library can store 800,000 books and accommodate 2,100 people at the same time.
It also has a lecture hall with a capacity of 600 seats. Completed in this July, this state-of-the-art library was just inaugurated yesterday with the presence of H.E. Dr John Pombe Magufuli, President of Tanzania and H.E. Ms Wang Ke, Ambassador of China to Tanzania, Hon. Prof Joyce Ndalichako, Minister for Education, Science and Technology of Tanzania and other senior government officials as well as UDSM leaders.


During the inauguration, President Magufuli praised China as a true friend of Tanzania, and spoke highly of China's aid to Tanzania, which has no conditions attached. He also said that the new library will make students to learn better.
The relationship between Tanzania and China began in the 1960s when these two countries initiated diplomatic relations on 9 December 1961. China went shoulder to shoulder with Tanzania and helped us in many aspects from political, military and development levels.
China has been providing various development services and has continued to help Tanzania in various sectors, all of which aim at developing and promoting political and economic development of Tanzania.
The Chinese Embassy has initiated the internship programme, which focuses on fostering talents for the future development of Tanzania. The contractor of the UDSM Library project had been conducting an all-round joint venture with UDSM with a view to providing more internship opportunities for college students in architecture, civil engineering and other related fields.

Each student was assigned to Chinese instructor of which 20 students underwent a two month internship in the Chinese aided library construction for UDSM. You and I can imagine a number of benefits Tanzanian students received during their internships.
Some of these include but not limited to one-to-one student-instructor relations, access to modern construction and engineering tools, receiving first-hand construction and engineering information as well as learning multiple skills in engineering and construction which in the end will help them develop their careers, and to take on multitasks in both engineering and construction.

Apart from the construction of this library building, Tanzania has been receiving a lot of support in recent years.
One of China's greatest support in recent years is the great and modern International Conference Centre named after the first President and founding Father of the Tanzania - Julius Nyerere International Convention Centre.
This conference centre is one of the biggest and modern conference centres in Africa and many international conferences are held there. In addition, China has built a modern building for the Ministry of Foreign Affairs and East African Cooperation, the building was completed in 2018.

All these buildings are located at the junction of avenue garden and Shaaban Roberts street of Dar es Salaam. China also constructed the Jakaya Kikwete Cardiac Surgery Institute in Muhimbili area.
This institution has greatly helped many Tanzanians, especially low income earners, to access heart surgery and treatment, a privilege that used to be for the prestigious few. But it has also helped eliminate the cost of sending people out of the country for cardiac related treatment.
This building is modern and has modern and affordable equipment. China still plans to build a huge Cardiac Treatment and Training Centre on the outskirts of Dar es Salaam.
This construction will help make it easier for Tanzanians to get cardiac related treatment services within minimal time and procedure. China has also been sending expert specialists to assist with surgical operations and treat various diseases in different hospitals.

The donations offered by China to Tanzania basically are too many, however, China continues with its strategies to support the African nations. China has committed to facilitating the construction of 5 universities of transportation in Africa, one of which is to be constructed in the eastern and central African countries whereby Tanzania was given the largest opportunity if we would have been smart enough to "go get" the opportunity!
In order to ensure that the promise is fulfilled, China has planned to convert the National Institute of Transport (NIT) college into a major university of transport in East and Central Africa.


The college aims to provide young East African people with expertise to help the country with qualified technical knowledge to manage modern infrastructure after they have completed their studies.
The construction of this college will also help reduce the costs of sending Tanzanians to study abroad, and will also help increase the number of professionals who will manage all technical activities, especially in the modern electrical infrastructure built in eastern Africa such as railways, road infrastructure, marine and air transport.
This is a clear evidence of how China is a true partner to African nations and intends to eliminate poverty. Apart from the plan to build a transportation university, China plans to build a Tanzania Vocational Training Centre in Kagera Region. The contract to construct the Vocational Training institute was signed on 26th November 2018.
This technical training centre is expected to cost more than $10 million. The centre will be built in two different areas where the first pilot will be able to accommodate 400 students and the second one will take up 400 students as well. Once ready the vocational institute will be able to attract 800 students. China also intends to build a huge and modern Geopark in the Ngorongoro Park.
The construction of this Geopark, aims to help increase more tourists that will invest more in our nation.
After completion of the construction of all infrastructures, a strategy will be set to market all tourist attractions especially the Ngorongoro crater considering that one of the largest tourist attractions in the world.

 

[joto la jiwe]

Is Kenya the only Country which borrows from China?, Angola, Sudan, Zambia are biggest borrowers, why not them?. Kenya you give false data and now every one is uncomfortable with you.

Please be real, you don't need to false anything about your life, World has got its ways of finding the truth, now the time for Kenya to be exposed has come.

Because we've been showing them the middle finger and borrowing from China instead.

 

[kennedy0000]

Is Kenya the only Country which borrows from China?, Angola, Sudan, Zambia are biggest borrowers, why not them?. Kenya you give false data and now every one is uncomfortable with you.

Please be real, you don't need to false anything about your life, World has got its ways of finding the truth, now the time for Kenya to be exposed has come.

Kenya is one of the most important countries in Africa.
Definitely the most important in Eastern Africa.
IMF needs such countries in its grasp. When it sees a big fish like Kenya moving away from them, they will make noise.

Those other countries you've listed, and you can include your Tanzania too, are nobodies. No one cares whether they stop borrowing from them or not.

 

[joto la jiwe]

May be is very important because of biggest slums in the world, and because every year UN must budget to feed starving Kenyans.

Kenya is one of the most important countries in Africa.
Definitely the most important in Eastern Africa.
IMF needs such countries in its grasp. When it sees a big fish like Kenya moving away from them, they will make noise.

Those other countries you've listed, and you can include your Tanzania too, are nobodies. No one cares whether they stop borrowing from them or not.

 

[kennedy0000]

May be is very important because of biggest slums in the world, and because every year UN must budget to feed starving Kenyans.

At least we pay our UN dues. Kenya is one of the few countries in the world that contributes more than it receives back.
Where is Tanzania? You don't pay your EAC dues. You don't pay your SADC dues. You don't pay your UN dues.
But we forgive you. We know your government needs the cash to buy korosho.

Angalia hii chart na unyamaze.

 

[Kafrican]

Good thing our Central bank Governor alikua mkubwa flani huko IMF kwahivyo anajua kila formula ambayo IMF inatumia.....
Yani IMF walichukua formular ambayo inafaa inatumia Kwa developed countries pekee (Akina Germany, Canada, US) na wakaitumia Ku calculate FX ya Kenya kana kwamba Sisi ni 1st world country!!!!! Thanks but no thanks , we are still developing, stop promoting us to levels we can't handle...

 

[Mkikuyu- Akili timamu]

Good thing our Central bank Governor alikua mkubwa flani huko IMF kwahivyo anajua kila formula ambayo IMF inatumia.....
Yani IMF walichukua formular ambayo inafaa inatumia Kwa developed countries pekee (Akina Germany, Canada, US) na wakaitumia Ku calculate FX ya Kenya kana kwamba Sisi ni 1st world country!!!!! Thanks but no thanks , we are still developing, stop promoting us to levels we can't handle...

IMF applies formula as per the national statistics of a country..If you fake GDP and other things, well you get yourself on a first world formular.
What Cbk Gvr should be telling us is what statistics they gave to IMF that prompted them to declare ksh 17% over valued.
Hii ndio disadvatage of trying to make yourself mic when in actual fact you are ldc

 

[Kafrican]

IMF applies formula as per the national statistics of a country..If you fake GDP and other things, well you get yourself on a first world formular.
What Cbk Gvr should be telling us is what statistics they gave to IMF that prompted them to declare ksh 17% over valued.
Hii ndio disadvatage of trying to make yourself mic when in actual fact you are ldc

CBK gave IMF the right statistics, IMF used the inappropriate formulae . Period

 

[joto la jiwe]

CBK gave IMF the right statistics, IMF used the inappropriate formulae . Period

Hahahaha, the world is jealous not only Tanzania. Jubilee hoyeeeee.