Sunday, January 21, 2024 – The Government of President William Ruto has absolved Gulf-based oil tycoons from the current depreciation of the Kenyan Shilling against the dollar.
In a statement, Treasury Cabinet
Secretary (CS) Njuguna Ndung’u stated that the government-to-government
(G-to-G) oil deal between Kenya and three Middle Eastern countries was not
to blame for the weak Shilling currently exchanging at 161 against the dollar.
CS Ndung’u remarked that the
G-to-G instead should be hailed for ensuring that the country did not find
itself in an economic crisis.
“The depreciation of the Kenya
Shilling as witnessed in the recent past is a result of market fundamentals
and not driven by the G-to-G arrangement,” Ndungu explained.
Market fundamentals are arrived
at by analysing the real fair market value of a stock or currency.
As such, the market
fundamental (fair valuation) of an asset is the discounted present value
of the stream of future cash flows attached to the asset.
Former President Uhuru
Kenyatta’s administration has been accused by the current regime of
artificially strengthening the Shilling instead of letting market forces
determine its value.
Through propping, Uhuru’s
government was accused of creating an artificial demand for shillings by
using foreign exchange reserves to buy the local currency.
According to Ndung’u, there was
a looming economic shutdown in 2023 as the policies by the former
administration created US dollar (USD) liquidity problems.
With the Kenyan economic market
stabilised and foreign exchange market pressures handled, Kenya will exit from
the oil deal in December 2024.
The Kenyan DAILY POST
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