How to stem shilling from ongoing fall

Bloomberg graph tracking performance of the shilling against US dollar.

Central Bank of Kenya Governor Patrick Ngugi Njoroge is right to use the tools at his disposal to stem the systemic free fall of the shilling against the American dollar and other major currencies. His recent warning to chief executives of commercial banks against speculative trading of the local currency demonstrates just how desperate the situation is.

Unfortunately, evidence on the ground suggests his warning is not likely to be heeded because there is too much easy money to be made in shorting the shilling and banks are in a desperate race to book ever increasing profits. There is nothing to indicate any of them has the country’s long-term interests at heart. Indeed, some analysts argue, banks do not have hearts. Be that as it may.