The Central Bank of Kenya (CBK) has rubbished concerns that persistent dollar shortages are triggering the emergence of a parallel exchange rate where lenders buy and sell well above the printed official rate.

CBK governor Patrick Njoroge scoffed at claims by manufacturers that constraints in dollar supply were forcing them to buy the greenback at more than Sh120 compared to the central bank’s official average exchange rate of Sh116.84 per dollar as of Monday.

Dr Njoroge said the foreign exchange market has enough dollars to meet demand from importers and corporates.

“The [forex] market generates and distributes something like $2 billion every month. So if you have somebody or a sector which is importing $90 million or $100 million, I think that’s nowhere near the $2 billion that we are putting out there,” the CBK boss said.

“They should understand that they are small in that sense and sort of go to the market like everyone else. There are no favourites in the market. Follow the rules of the market and everything will be okay.”

On Monday, the Kenya Association of Manufacturers (KAM) had called on the CBK to “propose and implement policy actions” to ensure sufficient dollars in the market to meet demand in “a timely manner”.

KAM chairman Mucai Kunyiha said the mismatch between dollar demand and supply has persisted for months and that manufacturers are buying dollars costlier.

“This situation, compounded with the global challenges we are all facing, calls on the central bank and the Monetary Policy Committee to propose and implement policy actions that will return the market to predictability and, crucially, to supplies of currency as and when needed in order to restore confidence in the market,” Mr Kunyiha said on Monday.

‘Find out why’

But, while the CBK chief admitted that a spike in dollar demand had hit the market, he said it has since normalised.

“What’s clear is that …two months ago, there was significant, unusual demand [for dollars] maybe because of the dividend that were being paid out. That I think we all understood. But that whole season has ended and money has been transferred,” Dr Njoroge said. “It’s a $2 billion per month market and that is significant. If you have an actor coming in looking for $1 million, $10 million or even $100 million and claims that it (market) is dysfunctional, then kazi kwako (it’s your work to find out why).”

In April, KAM said banks had imposed caps on dollar purchases, making it difficult to obtain adequate forex to meet supplier obligations and injuring the ability to negotiate favourable prices in spot markets.

Two industrialists also told Business Daily at the time, that they had been forced to seek dollars in advance as the persistent shortage threatened to put a strain on supplier relations.

“It’s interesting that some of the people that are writing to us don’t even have positions [and] they are not in the market. They are traders,” Dr Njoroge said.

By Business today

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