CBK governor Patrick Njoroge. FILE PHOTO | NMG
The International Monetary Fund (IMF) has urged the central bank
to make public details of its operations in the foreign exchange market
to improve transparency of local financial markets.
The
Central Bank of Kenya (CBK) does not publish details of its actions in
the foreign exchange market where it sometimes sells or buys dollars to
manage exchange rate volatility, and neither do
banks disclose how much they buy or sell to the regulator and each other.
banks disclose how much they buy or sell to the regulator and each other.
Investors
are left to gauge the amount of dollars the regulator spends or buys in
interventions by looking at the movement of official reserves at the
end of every week, a number that also reflects dollars spent in settling
government debt obligations and receipts from foreign loans.
The CBK routinely snubs media questions on the movement of the
reserves. “To help further develop financial markets and increase
transparency, the authorities should consider publishing ex-post
information on foreign exchange operations, such as volumes and number
of participants, as do other frontier and emerging economies,” said the
IMF in its Kenya country report released last week.
The
recommendation is part of wider reforms the Bretton Woods institution
is calling for in the money markets to help improve the effectiveness of
the monetary policy framework. Other measures include improving
liquidity forecasting, especially regarding large operations by the
Treasury and reviving the dormant horizontal repo market.
Traders
said the CBK was unlikely to start disclosure of forex sales and buys,
adding that the regulator might prefer to retain the element of surprise
to keep speculators at bay.
This week, with the
weakening shilling, traders say the regulator is likely to be active in
the market to prevent a rapid depreciation. The shilling was exchanging
at an average of 101.97 to the dollar in the afternoon.
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