Dollar scarcity in Kenya as CBK issues “ration” sales to manufacturers, importers
2 min readDollar scarcity in Kenya as CBK issues “ration” sales to manufacturers, importers, and others in need of hard currency.
The Central Bank of Kenya (CBK) has directed commercial banks in Kenya to ration dollar sales to manufacturers, and importers due to rising dollar scarcity.
The Central Bank issued a daily cap of $50,000 for most businesses looking to buy dollars at the official exchange rate.
The situation is compounded by the weakening of the shilling against the dollar.
The shilling has fallen to Sh115.59 units to the dollar from Sh104.44 at the end of March 2020, which means that it is costing companies a lot more to buy forex.
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According to reports, the dollar shortage has been caused by increased demand of the currency, as manufacturers intensify shipments of raw materials and equipment following economic recovery in the country.
In addition, efforts by Kenyan companies to pay dividends to their foreign investors have contributed to worsening the dollar crisis.
To arrest the situation, the CBK imposed a cap on dollar purchases in a bid to protect the country’s foreign reserves.
Unfortunately, manufacturers are already feeling the impact of the restriction.
The Kenya Association of Manufacturers (KAM) said inadequate access to dollars have been negatively affecting its members, as they are now unable to settle most of their obligations to foreign suppliers.
“One USD (dollar) purchase transaction used to take one working day. However, due to the daily cap manufacturers now have to plan 2-3 weeks in advance, depending on the dollar requirements for specific consignments… Planning in advance for foreign currency payments has resulted in an increase in working capital,” said KAM’s Mucai Kunyiha.
However, dollar scarcity is not unique to Kenya. Central banks across Africa have been grappling with the same issue, often resorting to rationing due to insatiable demand.
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