Kenya has run out of US dollars. According to a shocking report that appeared in a Nation Media Grouo publication on Friday, the Central Bank of Kenya (CBK) has now asked local banks to ration US dollars.
This comes as Kenya sinks deeper into a dollar shortage crisis amidst a weakening shilling whose free-fall the CBK, the National Treasury and the Presidency have remained dead silent about.
According to reports, commercial banks have been asked by the CBK to limit the amount of dollars they can exchange at a time to USD 5,000.
At the same time, Kenya’s foreign exchange reserves have dried up to lows last seen ten years ago. Reserves currently stand at Sh. 872.5 billion ($6.860 billion). This is equivalent to 3.84 months import cover which is the lowest since April 4, 2013.
This comes as the local currency continues to nosedive against the US dollar. A spot check by Bizna Kenya shows that in the month of February alone, the local Shilling fell from Sh. 124 to Sh. 127. The shilling has been falling since March 2020 when it traded at Sh. 104 against the US dollar.
Alarmingly, the current trend points to an accelerated free fall that is amounting to a loss of nearly one shilling per week against the US dollar.
The dollar shortage in the country which kicked off in mid-2022 has sparked costly parallel exchange rates that are forcing traders looking for dollars to get exchange rates of as high as Sh. 137.
According to a related report that appeared in a local daily, local banks are keeping off from selling dollars to each other.
“There has been a huge disconnect in the interbank market. No bank is willing to sell dollars to the other at the interbank rate when the retail rate is as high as Sh. 137,” the report quoted a local banker.
The report also noted that the CBK is being blamed over the forex crisis that is currently hitting the country hard.
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“The CBK introduced tough rules on the foreign exchange interbank market, crippling market operations. Through the interbank forex market, banks are able to trade hard currency among each other and at rates which determine the official or spot rate,” the report said.
“A muted interbank market has, for instance, forced banks to seek dollars from companies and individuals, forcing retail transactions to happen at weaker rates.”