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By:
VICTOR AMADALA | |||||||||
| Posted:
Jul,23-2019 23:58:24
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Nairobi__The Kenya shilling sunk further on Tuesday to hit a day low of Sh103.80 at 1pm, just an hour after two top National Treasury chiefs were charged with corruption. Cabinet Secretary Treasury Henry Rotich and Principal Secretary Kamau Thugge spent the night in police custody after the director of Public Prosecution Noordin Haji ordered their arrest for allegedly inflating a commercial loan for the construction Kimwarer and Arror dams by Sh17 billion. ‘"Whereas the project was to cost approximately Sh46 billion, the National Treasury negotiated a commercial facility increasing the amount to approximately Sh63 Billion which is Sh17 billion more than necessary," Haji said in a statement issued Monday.
Although the shilling has been under pressure in past weeks, it hit new 20- month high yesterday, surpassing Monday’s rate of Sh103.67 as captured by the Google currency tracker.
Money traders attributed the weakening of the local currency to several factors including shocks arising from arrests of the Treasury officials, mass dumping of shilling due to ongoing demonitisation and high demand for dollars by importers.
"Treasury is a vital government installation monitored closely by the international market. Arrest of top officials send shocks, lowering investor confidence,’" Bob Nderi, a money market analyst told The Star.
A financial expert at AIB Capital who wished not to be named said happenings at Treasury have just fueled depreciation sparked by mass damping of local shilling in the market ahead of the October 1 deadline to phase out old generation Sh1,000 notes.
It is true that the 'flu' at the Treasury has infected the shilling's performance in the market. However, I expect the local currency to continue sliding as the October 1 demonitisation deadline approaches," he said.
He added that the arrests at the Exchequer have lowered the country's sovereign bonds in the eyes international investors.
"President Uhuru Kenyatta must moves with speed to effect to salvage the integrity of the National Treasury. Recent activities have had a negative effect on investors' confidence,’" he said.Yesterday, Bloomberg reported that yield on Kenyan bonds due in 2024 changed to 5.144 per cent, while those maturing in 2032 and 2048 were down 0.4 per cent and 0.5 per cent respectively. In May, Kenya floated the third Eurobond in five years worth ($2.1 billion) Sh210 billion. The two tranches are priced at seven per cent for the 7-year tenor and eight per cent for the 12-year tenor. The country raised Sh202 billion in the second sovereign bond issued in Febraury last year in two equal tranches of 10 years at a coupon of 7.25 per cent and 30 years at a coupon of 8.25 per cent. The inaugural Eurobond was in June 2014 where a total of Sh280 billion ($2.8 billion) was borrowed in five and 10-year tranches. The first tranche expired in June. | |||||||||
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