At times I worry about the economic sense of this good professor...This is clear knee jerk reaction to the sliding of the shilling.
Are we surprised that the shilling has fallen? No, this was a long time coming especially with high imports, low exports or entry of dollars. The research department at CBK should have noted this early especially with reduced pirate money and capital flight before elections. Or has money been printed??
We cannot use the European fundamentals of hiking interest rates to sort out our problems. While in most stable economies these would tempt higher saving or entry of forex, the Kenya shilling is so unstable that no forex would come in. The risk is too high. A large proportion of our 'development projects' are financed by debts. ( Loans. We are not a savings culture
The ripple effect will result in higher cost of borrowing from banks and T-bills, more expense shrinking of economy. In a country where 50% live on less than a dollar, this will result in higher inflation, job losses, higher cost of transport, food.
The higher base rate will lead to higher t-bill rates reminiscent of the 1990's.
The losers will be workers, traders, businessmen and wanainchi and next government . The winners will be wenyeinchi, banks and high net individuals and institutional investors.
Our public debt is increasing, our budget is unsustainable our output decreasing.
We are the next Greece in the making, only difference that we have already sold our Tana Delta, Oil exploration rights. Our children and grandchildren will pay this debts, what is annoying is that we will pay to wenyeinchi's children. We need to rethink our economic strategy!!
I am very angry so should anyone with a bank loan, mortgage or pays taxes.