(Updates with shilling rate in fifth paragraph.)
Sept. 30 (Bloomberg) -- Kenya plans “various measures” to contain inflation that’s more than triple the government’s target and to stabilize the shilling, the world’s worst performer versus the dollar in 2011, President Mwai Kibaki said.
“These will address the speculation in the trading of foreign exchange as well as reduce the rate of inflation,” Kibaki said in an e-mailed copy of a speech delivered in Nairobi, Kenya’s capital, today. “In addition, the central bank will diversify sources of building up its foreign-exchange reserves.” He didn’t provide further details.
Kenya’s central bank raised the key lending rate by 0.75 percentage points to 7 percent on Sept. 14. Inflation rose for the 11th consecutive month to 17.3 percent in September on higher food and fuel costs. The shilling fell to a record low.
Central bank Governor Njuguna Ndung’u, who has accused speculators of playing a role in the currency’s slide, said on Sept. 27 that the bank is investigating commercial lenders for possibly exploiting their “market power.” The regulator plans to sidestep lenders by buying and selling foreign exchange directly to key industries to help the shilling, he said.
The currency, which depreciated 20 percent against the dollar this year to a record low of 104.2 on Sept. 27, was trading 0.5 percent weaker by 5:09 p.m. in Nairobi, compared with a close of 99.75 yesterday.
Kenya has asked the International Monetary Fund to release additional funds from its Extended Credit Facility to help deal with the weakening shilling, Kibaki said on Sept. 8.
In January, the Washington-based IMF approved a three-year funding arrangement worth the equivalent of about $508.7 million, with an initial disbursement of $101.7 million. An additional payment of $65 million was approved in June.
Prime Minister Raila Odinga, Kibaki’s partner in a power- sharing government, this week formed a team of government officials and industry leaders to devise ways to help smooth volatility in the currency market. The panel is expected to release its recommendations next week. The central bank’s Monetary Policy Committee is due to meet on Oct. 5.
--Editors: Ana Monteiro, Linda Shen
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