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Kenyan shilling slides on political uncertainty

BUSINESS
By | February 15th 2010

The Kenyan shilling neared a seven-month low against the dollar on Monday due to jitters caused by disagreements in the coalition government over the fate of ministers briefly suspended over graft allegations.

The principal partners in the coalition, Prime Minister Raila Odinga and President Mwai Kibaki disagreed over what to do with two cabinet ministers mentioned adversely in scandals in a

maize scheme and education programmes.

Late on Sunday, Kibaki overturned Odinga's order that Education Minister Sam Ongeri and his agriculture William Ruto step aside to allow for further investigations.

"What is unfolding on the political front is making the market uncertain," said Friday Mwafuga, head of trading at Co-operative Bank.

Commercial banks quoted the shilling at 77.25/35 against the dollar compared with Friday's close of

76.90/77.00. It had touched 77.35/45 in early trade.

The local currency is hovering at a level last touched in July, when it closed trade at 77.30 on July 13, and at 77.45 a day later, according to Thomson Reuters data.

Kenyans and donors have long called for leaders in the unity government — put together in 2008 to end a bloody post-election crisis — to act tougher on influential individuals blamed for several graft cases that have hit several key economic sectors.

Graft is often cited as a major impediment for businesses operating in the country, and how to tackle it has soured relations between the coalition government's partners.

"Basically I think it's responding to the ongoing issues on politics and corruption. I think the shilling is on the defence.

It might continue to weaken further. 78.00 is a possible target," said Jeremiah Kendagor, head of foreign exchange at Kenya Commercial Bank.

—Reuters

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