US Federal Reserve Chair Janet Yellen on Wednesday said she was “looking forward” to a hike in interest rates, which have been held at near zero since the 2008 financial crisis.
Despite mixed feelings about the hike in several quarters, as well as attempts to delay Yellen’s call until next year, federal policymakers may raise interest rates at their next meeting on December 15-16. African countries are apprehensive of how the decision might affect their economies. But not Kenya. The East African nation’s central bank governor says Kenya’s economy is resilient and has enough foreign exchange reserves to withstand any shocks from a rate increase.
“We have policy buffers. We have room to manoeuvre in changing rates,” Central Bank of Kenya (CBK) Governor Patrick Njoroge told journalists.
One of the effects of higher interest rates in the US is that it strengthens the dollar against other global currencies. Currencies and other assets drop in value, prompting investors to flee to safer assets. But Njoroge says there is no cause for alarm as Kenya’s hard currency reserves rose to $6.7 billion last month.
“We can reduce volatility by just selling (dollars),” Reuters quoted the CBK governor to have said. More so, the economy is not too reliant on a single export commodity and does not have just one trading partner. On Thursday, in Johannesburg, China and Kenya vowed to deepen mutually beneficial cooperation and push relations to the next level. In 2014, the bilateral trade volume between Kenya and China reached $5.09 billion.
One thing that could worry Kenya is its increasing dollar-denominated debt which became 56.3 percent of total debt ($13.6 billion) in April. But Ngoroje insists Kenya would be fine.
“We are actually stronger than we were…,” he assured.