The Central Bank of Kenya has set the exchange rate for the US dollar at about Sh. 116. But across the country, you will not find the US dollar at this rate.
This is because local banks had set up a parallel exchange rate through which they are selling the US dollar at Sh. 120 and above.
The parallel exchange rates come as Kenya struggles with an acute dollar shortage that has left manufacturers and entrepreneurs who rely on imports to run their businesses grasping on straws.
According to the Kenya Association of Manufacturers (KAM), importers are buying the dollar at more than Sh. 120 compared to the central bank’s official exchange rate of 116.81 units.
“Although the formally quoted exchange rate for the US dollar in the market is hovering around Sh. 115-116, none of our members can access currency at that price in the market. The real market price is now above Sh. 120,” KAM chairman Mucai Kunyiha said in a statement.
KAM also adds that the volatility in the exchange rate market has slowed dollar trading among banks or interbank deals. This has resulted in the worsening the scarcity of the US currency.
“Banks are unable to trade dollars between themselves, further exacerbating the supply constraints. The risk here is that we are creating a parallel shadow market with unwanted consequences,” Kunyiha added.
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The KAM says that the ongoing shortage has resulted in importers hoarding dollars or refusing to sell at the stated prices.
“Exporters and other entities holding US dollars are reluctant to sell at lower prices as it is clear and visible to them what the market value of the currency is. From the foregoing, it would appear that the market is losing confidence in the transparency and effectiveness of our foreign exchange market,” Kunyiha said.