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"id": 10532,
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"speaker_name": "Mr. M’Mithiaru",
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"speaker": {
"id": 72,
"legal_name": "Ntoitha M'mithiaru",
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"content": "Thank you, Mr. Temporary Deputy Speaker, Sir. I wish to add my voice in support of this Motion. In so doing, I congratulate my friend, hon. Keynan, for taking it upon himself to ensure this Motion is brought to the House. For the last six months, we have seen a steep decline of the Kenya Shilling. When the value of the Kenya Shilling declines, there are very many effects. One of them is the huge bill that our Kenyan importers will have to foot bearing in mind that Kenya is a net importer. Another effect is that Kenyans who pay school fees abroad have to contend with a very high bill. We are all aware that the management of the Kenya financial system falls under the CBK. It is also the CBK that has the supervisory role with regard to the management of the foreign exchange business. For the last four years until six months ago, the CBK had done a good job in that they managed to contain the trinity, namely, inflation, exchange rates and the interest rates. That was a feat that the bank achieved. But for the last six months, we have seen the opposite. Just a browse at the website of the CBK showed me that in January, 2008, the exchange mean rate of the Kenya Shilling to the dollar was about Kshs73. In December, 2008, the mean rate of the Kenya Shilling against the dollar was Kshs77. In 2009, the mean rate of the Kenya Shilling to the dollar was about Kshs77 until June this year, when it was about Kshs86. By November, 2011, it is over Kshs96. So, you can see clearly that in the last six months, something has gone wrong. We are all aware that in 2008, Kenya experienced a lot of problems. There was the issue of the post-election violence and the issue of the international financial crisis, but with all that, the Kenya Shilling was contained. If we also look at the players in the foreign exchange market in Kenya, they are the commercial banks, forex bureaus, the CBK and a few micro-finance institutions. The role of the CBK here is to ensure there is timely and correct submission of statistics of the dealings in foreign exchange. That is where the bank plays the supervisory role. We are in a floating exchange rate regime where the value of the Kenya Shilling is fixed by the forces of demand and supply. So, if we look at that scenario, then we can see that something has radically gone wrong, especially when we know that the determinants of the exchange rates are mainly the international traders, the volume of importers and exports, the domestic interest rates and also the political situation in the country. If by elimination we see that right now things are not as bad as they were in 2008 and 2009 when we had severe drought, then something needs to be properly investigated. Something must be investigated in the event that there are any illegal dealings of foreign exchange. Word going round is that there are some banks which are illegally holding foreign exchange. If that be so, it is only a committee of Parliament that can fathom this issue because it will tread even where eagles would fear to tread. In an effort to arrest this run away foreign exchange rates, the CBK has also increased its rate to 16.5 per cent. That means that commercial banks will, in turn, increase their base lending rates. Once the lending rates have been increased, then the growth of the country could be affected. That is because all those borrowers will have to pay very high interest rates. With those high interest rates, some of them will default and banks will have to content with many defaulters. The private sector, which is the brand of the economy, will actually be affected. Therefore, the economic growth that is envisaged will not be realized and the growth rate expected this year will be affected. In an effort to find out who is responsible for that, a committee of Parliament will be able to tell Kenyans what has actually gone wrong. The committee will also make recommendations. That is the only way we can be able to arrest the situation and ensure that our economy is on the growth path that we have charted for ourselves."
}