Mwaniki Wahome
22 October 2008
Nairobi — The depreciation of the shilling against the dollar was on Wednesday blamed on a commercial bank that had sought the foreign currency from other banks causing high demand in the market.
Acting Finance minister John Michuki said the commercial bank had been given the contract to pay for the maize imports currently underway to cover the food deficit in the country and instead turned to other commercial banks instead of the central bank.
The government is importing large amounts of food estimated at 3 million tonnes of mainly grains to cover the food deficit which was occasioned by poor weather and post-election violence that disrupted production early in the year.
Mr Michuki said the commercial bank, which he declined to disclose had caused temporary scarcity of the green back forcing the other banks to drive the price of the foreign currency high, hence weakening the local currency.
"What you saw about the shilling on Tuesday getting to between Sh 77 and Sh 78, that was because one of the banks was given contract to pay for the maize imports.
Instead of going to the CBK for foreign exchange, the bank started buying from the small banks and created an impression that the purchase had no limit.
He added "If they had gone to the CBK that would not have happened. The weakening of the shilling has nothing to do with the global financial crisis," Mr Michuki said.
The Austrian government also announced the cancellation of a Sh1 billion debt owed to it by the Kenyan government.
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