Central Bank Kenya made the right move

Ever since the year 2002 when the current president Hon. Mwai Kibaki came into power, the transport system has made notable improvement. There has been growth in the number of public service vehicles to match the growing population, a cheaper and easier way of importation of automobiles, an expansive and advanced system of roads to mention the Thika Road highway, the Mombasa Road highway, the building of Eastern and Northern by-passes etc. According to a research carried out by Ministry of Roads and Public works, we can safely say the sector is performing well in-terms of infrastructure upgrade. The problem, however facing the sector currently is the sky-rocketing fuel prices that have sent an up roar to the citizens of Kenya.

Energy Minister Hon. Kiraitu Murungi, in a house meeting in parliament, on 19 April 2011 cited that the two major factors affecting price, is the increase of fuel importation costs and the depreciation of the Kenyan Shilling against the dollar, this is in reference to an article published on the  Daily Nation dated 20^th April 2011. According to the Central Bank of Kenya Website, the current exchange rate of the shilling to the dollar is now at Kshs 84 as compared to Kshs 80.31 on 31^st December 2010. This affects the logistics of fuel importation because the same amount of money used to import then, secures a lesser quantity of crude oil that may not quite satisfy the needs of the consumers of the product. To ward of the shortages, the importers do so at much higher costs for the same quantity. In turn the costs are pushed onto the consumer, explaining the high fuel prices today.

A liter of petrol last year in the month of December went for Kshs 95 the price today has shot to Kshs 110, despite the price cap that was put into place by the Energy Ministry which took effect as of December 15 2010 according to the Capital Fm news website.

The Central Bank of Kenya stepped in and increased the money lending rates by 6% in a move to strengthen the shilling after the downward performance. In an article published in the Reuters website, Nehreen Sumar, a trader at Gulf African Bank, stated "The interest rate move by CBK has strengthened the shilling. It is possible that we may cross Kshs 83.00 this week".

It therefore seems that things will head for the right turn most especially if the government looks into the current prices of basic commodities. If they do so, coupled with the CBK’s move, then we will be able to feed our people and get them to work on time. (442)

JOAN WANJIKU IRUNGU
08-1460