The Central Bank of Kenya (CBK) has reportedly ordered commercial banks to ration dollars after a shortage in the US currency.
Banks have already started imposing these rations. A number of currency traders and importers say they have imposed a daily cap on dollar purchases as firms struggle to obtain adequate forex to meet their obligations, according to Business Daily.
One top CEO said that his business is restricted to a daily cap of $50 000, Business Daily reported.
CBK says they have been also working on containing panic buying of the dollar and protecting reserves amid the global outlook that has worsened in the recent months following Russia’s invasion of Ukraine.
“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,” Mucai Kunyiha, the chairperson of Kenya Association of Manufacturers (KAM).
“Planning in advance for foreign currency payments has resulted in an increase in working capital,” Kunyiha added.
Multiple banks have reportedly accepted the order by CBK. However, none have come forward to admit it to the media because of fear of reprisal from CBK.
KAM said that the shortage is causing an increase in the cost of doing business and panic buying of the forex.
Materials ordered by importers last year amounted to Sh399.62-billion ($3.5-billion), according to data shared by CBK.
“We now have to start placing orders one or two months earlier to get our deals done in time,” said a CEO of a manufacturing firm who, according to Business Daily, did not want to be identified for fear of punishment by the CBK.
US lender JP Morgan said it was quite a stretch to complete some client transactions in Kenya due to dollar liquidity constraints.
“Clients are informed that due to ongoing issues with sourcing sufficient US dollars liquidity in the Kenyan market in recent days, client requests for repatriation of Kenyan shilling via JP Morgan’s AutoFX program may be delayed,” Morgan said.
By Zintle Nkohla
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