[2008-06-18]  Safaricom IPO to blame for weak shilling — CBK
The shilling weakened last week due to the Safaricom Initial Public Offer refunds, the Central Bank of Kenya (CBK) has said.

The CBK said the shilling has depreciated against all the major currencies in the last week after brokers and sponsoring banks started refunding the money in excess of KSH236 billion.

"This was attributed to increased demand for foreign exchange by the importers and influx of shillings from the Safaricom IPO refunds," said the CBK in its weekly bulletin. "Against the US dollar, the shilling exchanged at an average of KSH63.45 compared with KSH61.91 per US dollar reported in the previous week," said the report.

The shilling also lost ground against the Sterling Pound, the Euro and the Japanese Yen to trade at KSH124.40, Sh98.94 and KSH59.50 respectively.

This compares with KSH121.60 per Sterling Pound, KSH96.01 per Euro and KSH58.95 per 100 Japanese Yen in the week ending June 5.

During the budget speech last week, Finance Minister, Amos Kimunya said it was in the interest of the country to maintain a strong shilling.

He said this would cushion the economy from the effects of rising oil prices as well as food imports.

The country imports more goods that it exports and the country would be required to seek more foreign currency to meet the import bill should the shilling continue to weaken. However, the exchange rate has been left to market forces where demand and supply dictates the exchange rates with minimal direct intervention from the CBK.

Last week, CBK issued a statement warning that the IPO refunds could destabilize the financial market and asked all commercial banks not to accept endorsed refund cheques. "This follows a recommendation of a special purpose committee that is monitoring the IPO process to ensure that the financial system is not distablised," said CBK in a statement.

"These cheques should be deposited in the account of the applicant." Sources say the Kenya Bankers Association has already issued a circular to the commercial banks to affect the CBK directive.


Source: Copyright © 2008 Standard Group