EPZ firms must be smiling all the way to the banks while the rest of the country grapples with effects of the weak shilling against other foreign currencies. The textile sub-sector is the fourth largest manufacturing sector in the country, accounting for 11 per cent, and comprises half of Kenya’s exports to the US under AGOA, according to yarnsandfibers.com. Like any other exporter in the country, the returns for exporting at times when the local currency is weak are extensive and exciting.
International business works this way: when importing goods, the exchange rate is in favour of the country selling. When exporting, the country selling is paid in relation to their currency. So, an exporter is favoured when the local currency is weak. Not fair, but a workable formula.
At the end of December 2010, the US dollar was exchanging at Ksh 80.5. In January 31, 2011, it was at Ksh 81.8, February 28, Ksh 82.2 and in March, Ksh 82.90. But it was in mid-March when it hit a 13 year low of Ksh 86.23. The Central Bank of Kenya, which had decided not to intervene as it was waiting for the money market to sort itself out, finally did in the week following the highest point of the exchange rate. It carried out an audit in all banks with the intention of getting the culprit, as it pegged the weakening of the shilling to speculations within banks and foreign exchange bureaus.
After the audit, the Monetary Policy Committee, Central Bank of Kenya’s branch mandated to maintain price stability and establish interest rates did the later, increasing the interest rate to 6%. This did stabilize the exchange rate and stopped it from weakening more than it had.
Let’s put the positivity in perspective. In 2009, Kenya’s garment exports, through EPZ, raked in Ksh 23.3 billion, according to the then acting C.E.O EPZA, Mr. J.N Kosure. In the same year, the average exchange rate was 1 US $ at Ksh 77.35, according to theodora.com. A simple mathematics will indicate Kenya’s unit of sale was 30.25 million units. The same unit sale multiplied by the exchange rate when it was at Ksh 86.23 gives the sale at Ksh 26 billion, 3 billion more. Now, that’s what exchange rate does to international markets. Positivity all the way for the exporters.
Word count: 388
International business works this way: when importing goods, the exchange rate is in favour of the country selling. When exporting, the country selling is paid in relation to their currency. So, an exporter is favoured when the local currency is weak. Not fair, but a workable formula.
At the end of December 2010, the US dollar was exchanging at Ksh 80.5. In January 31, 2011, it was at Ksh 81.8, February 28, Ksh 82.2 and in March, Ksh 82.90. But it was in mid-March when it hit a 13 year low of Ksh 86.23. The Central Bank of Kenya, which had decided not to intervene as it was waiting for the money market to sort itself out, finally did in the week following the highest point of the exchange rate. It carried out an audit in all banks with the intention of getting the culprit, as it pegged the weakening of the shilling to speculations within banks and foreign exchange bureaus.
After the audit, the Monetary Policy Committee, Central Bank of Kenya’s branch mandated to maintain price stability and establish interest rates did the later, increasing the interest rate to 6%. This did stabilize the exchange rate and stopped it from weakening more than it had.
Let’s put the positivity in perspective. In 2009, Kenya’s garment exports, through EPZ, raked in Ksh 23.3 billion, according to the then acting C.E.O EPZA, Mr. J.N Kosure. In the same year, the average exchange rate was 1 US $ at Ksh 77.35, according to theodora.com. A simple mathematics will indicate Kenya’s unit of sale was 30.25 million units. The same unit sale multiplied by the exchange rate when it was at Ksh 86.23 gives the sale at Ksh 26 billion, 3 billion more. Now, that’s what exchange rate does to international markets. Positivity all the way for the exporters.
Word count: 388
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