CBK orders banks to ration scarce dollars

CBK orders banks to ration scarce dollars

CBK Governor Patrick Njoroge. PHOTO | SALATON NJAU | NMG The Central Bank of Kenya (CBK) has directed commercial banks to ration dollars following a shortage of the US currency and the race to protect reserves, hitting manufacturers and general goods importers.

A number of currency traders and importers say banks have imposed a daily cap on dollar purchases as firms struggle to obtain adequate forex to meet their obligations.

This has forced industrialists to start seeking dollars in advance as the shortage puts a strain on supplier relations and the ability to negotiate favourable prices in spot markets.

The shortage is the product of increased dollar demand being driven by increased shipments of raw materials and equipment in the wake of the recovering economy and local companies disbursing dividends to foreign investors.

A top CEO of an industrial conglomerate in three high-capital intensive industries, including cement manufacturing, says his business is restricted to a daily cap of $50,000 (about Sh5.78 million).

The CBK has also been keen to avoid huge panic buys of dollars and protect reserves amid the global outlook that has worsened in the recent months following Russia’s invasion of Ukraine, surging prices of oil and other commodities as well as lingering concerns over the resurgence of Covid-19.

"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), said via email.

"Planning in advance for foreign currency payments has resulted in an increase in working capital."

Multiple bankers admitted the caps on dollar purchases but declined to come on record fearing reprisals from the CBK.

KAM said the lack of access to adequate hard currency was negatively affecting their ability to settle obligations to overseas suppliers in a timely manner.

The industrialists lobby said the crunch has strained relations with suppliers, at a time competition for raw materials has intensified globally due to rising demand amid lingering supply chain constraints.It reckons the shortage is now causing an increase in the cost of doing business and causing panic buying of forex.Manufacturers are amongst Kenya’s largest importers.Data kept by the CBK, for example, shows that materials ordered by importers last year amounted to Sh399.62 billion, only dwarfed by machinery and transportation equipment which was valued at Sh512.45 billion."We now have to start placing orders […]

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