Mainat wrote:Kizee1-I think we are conflating different issues. Firstly, has strong is the money supply->fx rate link? Imho, money supply is one of many factors, but not the primary driver which is infact BoP (which I'll deal with another day)
In terms of 2012 prospects for Ksh. My understanding is that the $600m is being repayed over quite a long-term horizon. I doubt if GoK will seek to convert it all to Ksh in one go. Instead, it'll probably be spread over the next 6/12 months and in essence help maintain $/Ksh. In effect, CBK will cut CBR and generally step back from its aggressive monetary policy, Ksh will weaken, but GOK will come in and swap $ for Ksh therefore maintain some of the strength.
In 2013, the new president will then take a hospital pass i.e. he/she will inherit a very messy set of GoK accounts...
No need to SHOUT btw.
interesting. the fx/money supply link has been pretty strong recently largely because foreign currency deposits have been growing the money supply. let's conservatively say about 45% of the 21% y-o-y growth in M3 has been driven by fx related issues. There's a section on the CBK website called publications, under that there's a menu called 'times series data', from where you can download the 'deposit corporation survey' under monetary and financial statistics menu. it's a simple spreadsheet that can show you the breakdown of money supply since the 90s. All you need to look at is the ratio of foreign currency deposits to money supply over the last 4 months.
my understanding is the $600m is a 2 year foreign loan and is supposed to fund this financial years expenditure... so i can understand where kizee might be coming from concerning quick conversion (they really can't sit on it). Although i don't have confidence in the policy loosening too quickly, but uve got an interesting point that it's necessary for them to swap the $. The government accounts are indeed messy... let's hope the best for the next president.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden