CBK should resolve shortage of dollars
The protests by manufacturers and importers about a shortage of dollars in Kenya should be taken seriously especially because it is also likely to affect the sensitive petroleum sector.
The manufacturer’s lobby group claims that lenders have imposed a cap on dollar purchases, making it difficult for them to buy enough forex to meet supplier obligations.
As the pressure mounts, industrialists are now coming out to say they have been forced to seek dollars in advance since persistent shortage has been driving a wedge between themselves and their suppliers.
Indeed, such a situation, which is further compounded by the weakening shilling, is not only hurting firms by costing them more to buy forex, but some are now contemplating downsizing production or temporarily shutting down.
Perhaps these revelations confirm earlier concerns by leading US lender JP Morgan, which recently issued a client alert, saying it was finding it difficult to finalise transactions in Kenya due to dollar constraints.
The Central Bank of Kenya (CBK) has been adamant that there is no such shortage. During the last Monetary Policy Committee (MPC) meeting, the regulator said the supply was adequate to meet demand from importers and corporates.
According to CBK Governor Patrick Njoroge, the market generates and distributes about $2 billion every month and as such, a sector importing $100 million worth of goods is nowhere near the $2 billion that the regulator is basing its estimates on.
Treasury honchos should therefore get to the bottom of the dollar challenges and find out what really is going on and what is behind the shortage. To their credit, the Kenya Bankers Association recently admitted to the shortages, blaming it on increased demand.
The next logical question then is; where is the shortage coming from? Are firms hedging against further weakening by stocking up on dollars or holding on tightly to their dollar reserves? Did demand surge following the full reopening of the economy, which unleashed pent-up demand for both consumer and capital goods?
However, no matter how policy makers resolve this question, the truth is that the shortage is affecting the operations and this has slowed down commercial transactions, and by extension economic activity.
Going by the sentiments of the regulator, bankers’ association and other key players, only the regulator has the viewpoints and capacity to know where the problem is and what steps are needed to address it.
If indeed close to $2 billion is in the market, then the regulator should just get to the source of this shortage and sort it, only then will the problem be solved.
