A foreign exchange shortage in the interbank market has grown so severe that the Central Bank of Kenya has reportedly asked financial institutions to limit dollar purchases by Kenyan companies. This shortage has forced Kenyan firms to seek greenbacks in alternative markets where the exchange rate is higher than the official government rate.
New restrictions
limit the operations of Kenyan companies.
Kenya continues to experience a foreign exchange shortage, and the Central Bank of Kenya (CBK) has reportedly instructed financial institutions to cap the amount of foreign exchange that companies and individuals can purchase, according to a report in Business DailySome financial institutions have been forced to impose a cap of $5,000 per day dollars per day, a lower cap of $5,000 per day has been imposed. Such restrictions make it difficult for Kenyan manufacturers and importers to meet their obligations.
The shortage, which reportedly began in mid-2022, suggests that the country’s foreign currency difficulties are worsening. In October of the same year, a CBK statement rejected Kenyan Vice President Rigati Gachagua’s claim that the country lacked foreign currency to import oil. The central bank claimed at the time that all foreign exchange used to import oil was sourced from commercial banks.
The CBK claimed to have sufficient foreign exchange reserves, but an unnamed executive of a local manufacturing company suggested that the situation was deteriorating.
“We are scrambling for dollars right now. We call every day for dollars, but only half of the six banks have them ready. Three of those banks tell us to check back later,” the executive said.
And while some companies have been lucky enough to secure as much as $50,000, that is still far less than they need, the executive added.
Kenya’s dwindling foreign reserves
Meanwhile, the report said, Kenya’s top companies are now getting their dollars from companies with high exchange rates, such as those in the hospitality and aviation industries. Instead of using the official exchange rate of 127.39, some companies reportedly use a higher rate of 137 shillings to the dollar.
Some Kenyan commentators have attributed the dollar shortage to strict rules introduced by the CBK that target illegal foreign exchange dealers. This commentator argues that the stricter rules have paralyzed the operation of the foreign exchange interbank market.
{But CBK Governor Patrick Njoroge is quoted in a January Reuters reportas claimingthat Kenya has ample foreign exchange reserves. Njoroge was speaking after it was revealed that Kenya’s foreign exchange reserves fell below the statutory requirement of four months of import cover.
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