Kenyan President William Ruto said on Tuesday he expected the shilling to strengthen to below 120 per dollar in the next couple of months, citing an oil import deal that will cut demand for dollars, but some traders said this was unrealistic.
Like other frontier economies, the East African nation is experiencing hard currency shortages, weakening its currency, as importers scramble for reliable supplies. It signed an oil import deal with companies in the United Arab Emirates and Saudi Arabia last month, putting in place a longer credit period and altering the structure of the deal to stagger demand for dollars in the market.
"In the next month or so you will see the exchange rate
coming down in a very phenomenal way. In fact, in my estimation,
in the next couple of months the dollar will come below 120
shillings, maybe 115, you never know," Ruto said in a televised
government meeting.
The shilling was trading at 133.65/85 per dollar on
Tuesday, having weakened by 7.73% this year so far.
But the dearth of dollars has given rise to a parallel market where the rate is on average 10% weaker than in the official market.
Currency traders said the president's exchange rate projection was unrealistic, adding that more needs to be done to support the shilling.
"You need to get investor flows coming in for bonds and
stocks and industry growth, and that is a long-term thing," said
a senior trader at a commercial bank in Nairobi.
Ruto has also said officials were working to bring back
the interbank foreign exchange market, whose collapse in recent
years due to aggressive policing by the central bank has been
partly blamed for the shortages.
(Reporting by Duncan Miriri and Hereward Holland; Editing by
Alex Richardson and Nick Macfie)
