While addressing the parliamentary committee, Thugge said "I think for several years now we have had an overvalued exchange rate."
Five or six years ago, financial institutions such as the International Monetary Fund and the World Bank had considered the shilling overvalued by 20 to 25 percent, the Central Bank governor added.
Thugge said Kenya tried to "maintain a fairly artificially strong exchange rate."
This is "at a cost of a loss of international reserves," he added.
The East African authority said Kenya's foreign exchange reserves had dropped to the equivalent of about 3.7 months of import cover.
"It is still sufficient to address any emergencies but there has been that decline in the level of reserves trying to defend perhaps an overvalued exchange rate," Thugge added.
Thugge's sentiments were in reaction to Kenya's shilling this week slipping to more than 150 to the dollar — a decline of almost 24 percent over a year and compared to around 100 in October 2018.
The shilling's sharp depreciation has added to the economic hardship of Kenyans who have been suffering a cost-of-living crisis and the imposition of a range of new or increased taxes.
Anger over rising prices, particularly for basics such as food and fuel, led to a series of sometimes deadly protests as citizens criticized the government of President William Ruto earlier this year.
Ruto has been accused of breaking promises made during the 2022 election campaign that he would look out for the interests of Kenya's poor.
The government has argued that the removal of subsidies on items such as fuel and increased taxes are needed to improve public finances and ease the national debt burden of more than 10.1 trillion shillings ($67 billion).
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