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Kenyan govt urged to weaken shilling
www.chinaview.cn 2006-02-22 05:03:39

    NAIROBI, Feb. 21 (Xinhuanet) -- The strong Kenyan currency shilling is threatening the survival of local manufacturers and farm produce exporters, industrialists complained here Tuesday.

    Addressing a news conference in Nairobi, the exporters said they have already incurred heavy losses and diminished competitiveness in the international market and called on the Central Bank of Kenya (CBK) to intervene to save the economy, which is export oriented, from suffering further shocks.

    The Kenya Association of Manufacturers (KAM), Kenya Flower Council and Fresh Produce Exporters Association of Kenya, led the onslaught on CBK Governor Andrew Mullei with an express demand that the exchange rate be stabilized at between 76 and 78 to the dollar to save locally manufactured goods from losing their competitive edge in regional market.

    "We expect to see more proactive action on the part of the Ministry of Finance and CBK maintaining predictable trends in the exchange rate," said Erustus Mureithi, the chairman of the Kenya Flower Council.

    "The government has the instruments and power to ensure that the shilling supports its overall policy of deepening export oriented domestic production. We propose that the government move expeditiously to ensure that the exchange rate upholds with this broad economic objective," Mureithi noted.

    KAM Chief Executive Betty Maina said industrialists were alarmed by the apparent apathy of the central bank in dealing withthe exchange rate dilemma.

    "Some of the exporters are already relocating to neighboring countries due to strong shilling and also because the cost of production is low. We want a predictable policy on exchange rate so that we are able to plan," said Maina.

    Kenyan exporters have been putting pressure on the central bankto intervene and weaken the shilling to a range of between 76 and 78 to the dollar. But Mullei has said the bank had to balance the interests of exporters and importers.

    The exporters said they have been losing 15 billion shillings (about 200 million U.S. dollars) annually as a result of stronger shilling and needed to be supported because they faced stiff competition from the region due to rising labor costs and diminishing preferential market access arrangements.

    They blamed an influx of dollars held locally for relief and reconstruction projects in southern Sudan and Somalia as reasons behind the recent surge in the exchange rate.

    Last month, Trade and Industry Minister Mukhisa Kituyi expressed concern over the stronger shilling, saying it was hurting the economy.

    Echoing calls by the country's exporters for a weaker shilling,Kituyi called on the ministry of finance to intervene and devalue the strengthening shilling.

    "The stronger shilling is hurting the export sector. I have raised this concern with relevant authorities that something has to be done to the strong shilling," Kituyi said.

    Saying he had raised the matter at the highest level, the minister claimed appreciation of the currency had left one third of horticulture and flower exporters struggling and reduced margins in key sectors such as textiles.

    On Tuesday, the Tea Board of Kenya said the combined effect of the drought and the appreciation of the shilling are expected to cost the country about 8 billion shillings (about 115 million dollars) in lost revenue. Enditem

    

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