Find creative ways to end dollar shortage
That the shilling is currently trading at about 140 against the dollar is a cause for worry in many sectors of the economy, particularly given Kenya is a net importer of goods and services. Already, the country’s balance of trade is not encouraging, although this has been the trend since the 1990s. However, this is not to mean policymakers should sit on their hands, believing they can do nothing.
Indeed, they should feel obligated to think of ways in which the country can move from being a net importer to a next exporter in the medium term. And once this journey has started, they ought to put in place incentives that will encourage a larger inflow of dollars from Kenyans in the Diaspora and from Kenyan companies selling goods abroad. There is also need to find ways in which foreign investors who repatriate their profits can be encouraged to re-invest some of their profits in the country to reduce dollar outflows especially during the season when listed companies pay out dividends.
Dollar incomes from crops such as tea and coffee can also be increased by encouraging home-grown value addition so that Kenyan entrepreneurs and farmers can earn more per kilo compared to the current scenario under which they sell largely unpackaged products in bulk, only for buyers abroad to make more by blending and packaging and re-exporting the same products.
In the long-term, policy makers should feel compelled to boost both manufacturing and emerging Fourth Industrial Revolution goods and services with a view to placing Kenya at a vantage position vis-à-vis its trade with other countries. It is imperative that they learn from Kenya’s trading partners how to leverage the advantages the country has so that it can earn more. This is the only way the shortage of dollars can be addressed and the shilling strengthened.
There is no magic bullet to addressing the current shortage in the short-term besides borrowing from the Bretton Woods. However, going forward, there is need for more creative thinking and policy making that will make Kenya and Kenyans earn more dollars, even if that means borrowing longterm loans abroad for onward lending to our less economically endowed neighbours. Given that Kenya is the leading market for Foreign Direct Investments, we can leverage on this to transform Kenya into a regional lenders market, and earn dollars from the cost of money, just as our super-profitable private banks are doing.