The Central Bank of Kenya (CBK) has directed commercial banks in the country to ration dollar sales following a shortage of the US currency.
The apex bank’s move is to protect reserves as the Kenyan shilling fell to Sh115.59 units to the dollar on Friday, having depreciated from Sh113.13 at the start of the year and Sh104.44 at the end of March 2020.
According to Business Daily, the development has forced industrialists to begin seeking dollars in advance as the shortage puts a strain on supplier relations and the ability to negotiate favourable prices in spot markets.
Mucai Kunyiha, chairperson of the Kenya Association of Manufacturers (KAM), in an email note, told Business Daily that “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, depending on the dollar requirements for specific consignments”.
“Planning in advance for foreign currency payments has resulted in an increase in working capital,” Kunyiha said.
KAM said the lack of access to adequate hard currency was negatively affecting the members’ ability to timely settle obligations to overseas suppliers.
A top chief executive officer (CEO) said his business is now restricted to a daily cap of $50,000.