Kenya is facing a dollar shortage crisis. Businessmen in the country are unable to access dollars from local banks to fund their imports.
According to the Kenya Association of Manufacturers (KAM), the lack of access to hard currency is negatively affecting their ability to settle obligations to overseas suppliers in a timely manner.
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KAM says that this has strained relations with suppliers, at a time competition for raw materials has intensified globally due to rising demand amid lingering supply chain constraints.
“Many of our members have had challenges accessing dollars from their banks to meet their international commitments in a timely manner. This is putting a strain on supplier relations and the ability to negotiate favourable prices in spot markets,’’
said KAM.
“Liquidity in the market is critical to allow businesses to focus on their core activities of cost-efficient production and avoid panic buying… we are calling for the opening up and encouraging interbank trading to increase liquidity in the market.”
KAM says the problem is now causing an increase in the cost of doing business and causing panic buying of forex.
These concerns come hot on the heels of revelations by US lender JP Morgan.
JP Morgan has also issued a client alert saying that that it has been facing troubles in finalizing client transactions in Kenya due to dollar shortage in Kenya
“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,”
said JP Morgan.
“Liquidity constraints may result in delayed execution and completion of foreign exchange transactions.”
The Central Bank of Kenya has been silent over the ongoing crisis, maintaining a blind eye even as the Kenya shilling weakens against the dollar at an alarming rate.
The Kenya shilling is now trading at Sh. 115.5 to the dollar, with fears that it will soon dip to Sh. 116 to the dollar.