By Judith Gicobi
Banks now report that there is a significant demand for dollars amid a severe scarcity, driving up the cost of getting the crucial currency.
In the aftermath of a strong Covid-19 recovery, the Kenya Bankers Association (KBA) claimed there is increased dollar demand by corporations to pay dividends and meet their international obligations.
“We have been in constant contact with the Central Bank of Kenya (CBK) to address the strong demand of dollars in the market. The Central Bank, having the best view of the market situation, has assured us that the market is well balanced in terms of supply and demand of dollars,” stated KBA in a statement yesterday, despite denials that the regulator has been tampering with the foreign exchange (FX) market.
The country’s foreign currency reserve, according to the KBA, is regularly replenished through export profits and transfers.
External liabilities, particularly import payments, have, on the other hand, increased at a quicker rate.
“This, we believe, will stabilise in due course, and the market will revert to normal,” KBA’s Chief Executive Habil Olaka said in a statement.
There have been indications of a dollar scarcity in the market, making it hard for dealers to import both finished goods and raw materials.
Banks have been lobbying for CBK to enter the market and sell the green back to currency traders at a subsidised rate, citing a dollar scarcity.
Regrettably, according to EFG Hermes, an Egyptian investment bank, the CBK’s pace of permitting the local currency to appreciate has been lagging behind market expectations.
According to the bank, the country’s external accounts were strained as a result of the Ukraine conflict, which drove up the cost of imports such as fertilizer, wheat and petroleum.
The shilling is currently at Sh115.7. It is hitting new lows every day.