Wednesday, June 12, 2024
HomeAfricaCurrency egoism: Thriving in Kenya, slowly rising in Tanzania but absent in...

Currency egoism: Thriving in Kenya, slowly rising in Tanzania but absent in Uganda

There were some screaming stories in Kenyan media and hysteria on social media this year when the Kenyan shilling kissed the Ksh150 level to the US dollar.

The pessimists weighed in with gloom warning of continued national and economic decline. The Kenyan currency has seen losses of 21.6 per cent against the US dollar from Ksh120.34 on September 12 last year to Ksh146.36 as of Monday.

Yet, not everyone thinks that showing was disastrous. In 2018, the International Monetary Fund (IMF) judged that the Kenyan shilling was overvalued by 17.5 percent and re-classified it from a floating to a managed currency. Some economists in Nairobi privately speak of it as being overvalued by up to 50 percent.

They believe that hurts, especially, exporters, and drives up costs of Kenyan goods for foreign buyers and tourists. If the Shilling was cheaper, they argue that Kenya would sell a lot more abroad, and see a sharp rise in the number of tourists. Even though that will increase the local cost of the country’s foreign debt, they argue it would all cancel out, and leave it some change.

They speak privately because the value of the Kenyan shilling in a regional context is not about the economy. It is about national pride. As East African largest economy, the country’s financial standing and the value of its shilling need to be seen as the “strongest”. If it is not in reality, then it has to be in myth. The prestige of the largest East African economy, strongest currency, have combined with national pride to turn the exchange rate into an emotive patriotic issue.

Uganda, on the other hand, has by far East Africa’s freest exchanging currency. With limited massaging from the Central Bank, it is remarkably stable, trading up and down a narrow of USh3,600-Ush3,750 for years. It is a strange currency, almost immune to local turmoil, bent only by internal disruptions.

Whereas the Kenyan shilling traditionally gets wobbly during elections, the campaign and election season in Uganda, which is very violent, is often a very stable period for the local currency. Economists in Kampala argue that it is because the politicians are away in the villages looking for votes and are not around in the capital meddling.

The best exchange rate of the Kenyan shilling to the Ugandan unit today is Ush26. At the same time a year ago, it was Ush32. Some nationalist Ugandan economists predict a rate of even Ush18 in a year. That would be hell for Ugandan businesses, especially those who export food to Kenya.
In any event, currency nationalism and mine-is-better-than-yours boosterism is very low in Uganda.

It is probably a result of the history of the Zimbabwe-style fate of the shilling in the 1970s during Idi Amin’s rule, and then in the years after his fall until 1987, with the currency change a year after Museveni’s National Resistance Army/Movement seized power. When a new currency arose from the ashes, the country asked little of it. It was enough that it didn’t depreciate by 25 per cent every fortnight.

Wrapped into East African currency egoism is the ultimate nationalist pride. This was illustrated dramatically in March 2015 when Kenyan economist David Ndii, now chair of President William Ruto’s Presidential Council of Economic Advisors, penned a piece in Daily Nation that roiled the country.

Entitled “Kenya is a cruel marriage, it’s time we talk divorce”, Ndii argued that the Kenyan nationhood profit had been a disastrous failure, and secession might be the best way to salvage the pieces.

The debate raged, angrily, for weeks. No subject had ever got the wide range of Kenyan public officials and intellectuals to wave the flag in defence of the motherland as much as that article. Daily Nation’s website was swamped with impassioned comments.

It seemed impossible then than any subject would arouse Kenyan nationalist ennui like that. Wrong. It came 10 months later in January 2016, again at the hands of Ndii. In a column titled “What Magufuli presidency means for Uhuru’s reign”, Ndii argued that Kenya had been eaten to the bone by corruption and tribalism, it would soon all but collapse.

At that point, he had made an argument that is common fare, and not one to arouse a country that has become cynical over corruption and tribalism. Ndii, however argued that then newish Tanzanian President John Magufuli, who was still on a hammer-and-tongs crusade against corruption, was likely to give the Tanzanian economy a massive lift.

“It is the misfortune of Uhuru Kenyatta that his presidency is now to be benchmarked against a Tanzanian president who is rekindling Nyerere’s leadership ethos — humility, modesty, integrity, the personal discipline and public service ethic.

“We are looking at a Tanzania economy 20 percent larger by 2020. Tribalism is costly”, he wrote.

Strange to imagine, but that was considered crossing the red line further than calling for the breakup of Kenya. The fury and debate over the article raged more fiercely, longer, and was considered by patriots as a greater act of treason than the Kenya divorce piece. It didn’t help that Tanzanians jumped on it with it relish.

It didn’t come to pass. The Tanzanian economy is not 20 per cent bigger than Kenya’s. But for many, the idea that the Tanzanian economy would dethrone Kenya as king of the East African hill, was more painful than the disappearance of the Republic of Kenya.

Source: The EastAfrican



Most Popular