Kenya Central Bank Head Doesn’t Agree With IMF on the Shilling

(Bloomberg) -- Kenya’s central bank sees the shilling as fairly valued, unlike the International Monetary Fund, Governor Patrick Njoroge said.

The central bank doesn’t “agree with the IMF’s assessment” that the shilling is about 17.5 percent overvalued, Njoroge said Tuesday in an interview with Bloomberg Television. “We believe that there were mistakes in their calculation.”

The IMF last year reclassified the shilling from “floating” to “other managed arrangement” to reflect the currency’s limited movement due to periodic central bank interventions. The currency has been fairly stable for the past 3-1/2 years and the regulator has been steadfast in saying it only intervenes in the market to reduce volatility.

“We do not prop it up,” Njoroge said. “We have a flexible exchange rate. We do not target a rate or direction.”

The shilling was at 101.21 against the dollar by 9:25 a.m. in Nairobi, up 2 percent from a 103.23 low in November. For the year to date, the unit has gained 0.6 percent, according to data compiled by Bloomberg.

GDP Growth

Kenya, the world’s largest exporter of black tea, is facing a prolonged dry spell that’s left more than a million people in need of food aid. If that ends up being a severe drought it could take about 1 percentage point off economic growth this year, bringing expansion down to 5.3 percent from the government’s current forecast of 6.3 percent, Njoroge said.

There would also be an impact on the nation’s current account, but the central bank can manage that, he said.

--With assistance from Paul Wallace and David Herbling.

To contact the reporters on this story: Vonnie Quinn in New York at vquinn@bloomberg.net;Guy Johnson in London at gjohnson87@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Rene Vollgraaff

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