On Saturday the 8th of October 2011 we had a get-together with Professor Terry Ryan. The bespectacled economist forms part of the echelon the Central Bank of Kenya where he sits as the Economics Secretary. He holds many accolades and sits in Boards of several companies. I later found out that he is also a consultant with the World Bank. Simply put, his prestige precedes him. Character-wise, this gentleman is charming and down-to-earth.
A person of his position would probably be associated with flamboyance but his was a down-to-earth so thick you could cut it.
The audience was composed mainly of university students and some young professionals. Most of them had to pinch themselves several times just to confirm that they were not dreaming and that they were actually listening to Professor Ryan himself.
In recent times, the Kenyan currency has been dancing to some music with no sense of humor. It has been losing against the American dollar at a rate so high it has chased the mice away. In the financial week ending Friday the 7th September 2011, it had reached a high of 107 against the dollar. The situation was getting so dire that some Kenyans had checked into immigration offices to update their passports just in case things spiraled out of control (so much for patriotism).
Before us sat a man all the answers to the biggest question on our minds: Why? A gentleman who understands the forces of demand and supply just like a hen understands its chicks. He was about to be grilled by an audience full of questions and ready to fire!
Prof. Ryan began by telling the tales of the trouble that is brewing in the Euro-zone. My mind drifted as he was talking but the example of Greece did not escape me. He said that the country had gone broke (if a whole country can go broke who am I?). Apparently, Greece was unable to service its debt and had therefore declared itself bankrupt. He also mentioned that countries like Spain and Italy were also on their way given that their credit rating had been downgraded by rating agencies such as Standard & Poors. Their ability to service their loans was dwindling.
He also touched on the Americans recession mentioning words like Lehman Brothers and something about Warren Buffet laughing (my memory does not serve me right). The following analogy was of interest. “An Economist is like a doctor. He looks for the symptoms in the patient and gives a diagnosis. Whether the diagnosis is correct or not remains to be seen. Likewise, an Economist looks at where the economy is hurting and puts measures to contain it.”
During Q & A session, many hands shot up. It was quite evident that they were all eager to know what was ailing the shilling and what measures the Central Bank had put to curtail the downward spiral. The global recession was the primary reason but he also added that the action of four major banks to hold dollars in huge quantities could have made the situation worse. This had made the dollar demand to sky-rocket. The Professor warned that the action of those banks was completely legitimate and just business (so no pointing fingers). This led the central bank to raise the base lending rate by 4%.
To wind up, a curious member of the audience wanted to know whether the Professor was optimistic of the current situation. “The problem with us is that we look at the situation in our country without comparing it with our neighbors. If we were alone, then it would be a problem. Has anyone checked the rate of the Ugandan shilling against the dollar closing for this week? What about the South-African rand? And what of the Nigerian Naira? No? If you check you will notice that they have also gone up, in some cases more than the shilling. So, don’t panic. It’s happening globally. We are all in the same boat, so, yes I am optimistic.”
In summary, it was a very informative get-together filled with many twists and turns regarding what is happening globally economy-wise. The audience was equipped with enough ammo to fire at their colleagues who could not make head or tail regarding the wobbling of the shilling and global trends. We are looking forward to our next guest.