EFFECTS OF DOLLAR SHORTAGE ON COMMON MWANANCHI.

Kenyan firms purchased more products and services during the month of March despite the numerous challenges including the massive US Dollar shortage across the country that has hit hard on importers of goods.

According to Stanbic Bank Kenya in their latest survey, during the month of March, there was a renewed increase in firms’ purchasing activity, after weak demand led to a reduction in the previous survey period.

“The softer fall in new orders encouraged an increase in purchases, although the upturn was only marginal overall and weaker than those recorded throughout the five-month growth sequence which ended in January,” noted Stanbic in their latest PMI.

Despite the increase in purchases, a shortage of goods linked to US dollar supply issues and a higher exchange rate led to a deterioration in supply chain performance during the month of March.

“Though the rate at which lead times lengthened was only mild, it was nevertheless the sharpest seen since the initial COVID-19 lockdown in the second quarter of 2020. Some firms noted that muted demand for inputs had partly offset this disruption.”

At the same time, the survey noted that concerns over goods availability and currency markets led Kenyan businesses to expand their stocks of purchases at the end of the first quarter. Some firms also mentioned stockpiling inputs amid hopes that demand will improve.

“While the rise in inventories marked a swift turnaround from a decline in February, it was only modest overall and slower than the series long-run average,” noted the survey.

The Central Bank of Kenya (CBK) has been putting down measures to address the US Dollar shortage in the country, including issuing a code of conduct to commercial banks that will guide the issuance of foreign currencies, specifically the US Dollar.

President William Ruto has also weighed into the matter saying the government is working towards ensuring that pressure on the Kenyan shilling eases.