Kenyan Shilling Has Been Undervalued by International Monetary Fund, CBK Claims

Central Bank of Kenya (CBK) has questioned the International Monetary Fund (IMF) by refuting the values put by the International body. A report that was released recently – An assessment of Exchange Rate Misalignment in Kenya which was published at the end of the last week, Central Bank of Kenya has challenged International Monetary fund assumption maintaining that the local units exchange rate alignment to prevailing fundamentals.

Patrick Njoroge,who is the Central Bank Of Kenya governor earlier disagreed with International Monetary Fund thought of the shilling misalignment to insist of the banks non- intervention to the effective exchange rate. The new retaliation is however an empirical documentation of the local currency historical misalignment where the Central Bank of Kenya employs Behavioural Equilibrium Exchange Rate formula which a huge chunk encompasses the movement of the nominal exchange rate to changes in commodity prices while holding cynical perverse outcomes at constant.

CBK findings tracking Kenyan shilling value over the years between 2014-2017, it holds that widely within the fundamentals with the only counts of deviations remaining close to the equilibrium. The findings closely analyzed by being compared to alternative measures of deviation to include purchasing power parity,trade elasticity and macro- economic balance.

International Monetary Fund own research has too observed large regression which equate to high Forex misalignment to reduce the reliability in countries with large productivity differentials. The assessment of the shilling is expected to brew more war between the two organs on the true shilling value even as Kenya is getting ready for talks on the capture of a new standby credit facility.