Due to the shortage of US dollars, it is a challenge for producers and importers of common goods to fulfill their responsibilities. Following a shortage of dollars and a rush to protect reserves, the Central Bank of Kenya (CBK) has ordered commercial banks to limit the amount of dollars they provide.
Many currency traders and importers claim that banks have imposed a daily limit on dollar purchases of only $5,000 because businesses are finding it difficult to find enough foreign currency to meet their supply needs. Due to the shortage, industrialists are now forced to find dollars every day and from many lenders to meet their monthly demand for hard currency. This makes it more difficult to maintain good supplier relationships and bid for good rates in the spot market.
Banks, especially the biggest institutions, are running out of dollars indicating that the currency problem that started in the middle of last year with lenders approving limited dollars has worsened.
“Now we are scavenging for dollars. Only half of every six banks we call every day for dollars will have something for us. Three of the banks will ask us to check later,” said a top executive of a manufacturing company who requested anonymity for fear of retaliation from the Central Bank of Kenya (CBK).
“What is available in the bank is between $5,000 and $10,000. One would be lucky to get $20,000 and very lucky to get $50,000 from one bank. This is crazy for a business that needs $1 million a month for supplies and we get every dollar at Sh137,” he added.
Importers claim they are forced to buy dollars at the level of Sh137 or more because they cannot access the official purchase of Sh127.39.
Leading companies have started trading dollars among themselves, and those in need of cash are showing interest in hotels and airlines. This violates the law and creates a parallel dark market that can cause several economic problems, such as preventing foreign direct investment (FDI), promoting rent, and reducing the interbank FX market.
Some lenders acknowledged the dollar purchase cap but chose not to disclose it publicly for fear of retaliation from the CBK. Industry leaders say limited access to hard currency is affecting their capacity to make timely payments to foreign suppliers.
Industrialists’ organizations say that the dollar crisis has damaged relations with suppliers while global competition for raw materials has intensified due to persistent demand and persistent supply chain constraints.
The weakness is due to increased exports of raw materials and equipment following the economic recovery, which has boosted demand for dollars.