• The Central Bank of Kenya (CBK) has instructed financial institutions to impose limits on the amount of foreign exchange that businesses and individuals can purchase.
• Kenyan firms have been forced to seek greenbacks on alternative markets where the exchange rate is higher than the official government rate.
• The CBK Governor, Patrick Njoroge, has asserted that Kenya has adequate foreign reserves despite the ongoing shortages.
Kenyan Forex Crisis
Causes of Foreign Exchange Shortages
Growing shortages of foreign exchange on the interbank market have reportedly forced the Central Bank of Kenya to ask financial institutions to ration dollar purchases by Kenyan businesses. The shortages have forced Kenyan firms to seek greenbacks on alternative markets where the exchange rate is higher than the official government rate. Some commentators attribute these dollar shortages to tough rules introduced by the CBK targeting illegal forex dealers.
Limits Imposed by CBK
Kenya’s ongoing foreign exchange shortages have reportedly forced the Central Bank of Kenya (CBK) to instruct financial institutions to impose caps on the amount of forex that businesses and individuals can purchase. According to a Business Daily report, some financial institutions have imposed caps as low as $5,000 per day, making it difficult for Kenyan manufacturers and importers to meet their obligations.
Foreign Exchange Sourcing Alternatives
Top Kenyan firms are now sourcing dollars from forex-rich firms such as those in hospitality and aviation industry, instead of using the official exchange rate of 127.39 shillings for every dollar they use a higher rate of 137 shillings for every dollar.
Official Assertions about Foreign Reserves
The CBK governor, Patrick Njoroge, is quoted in a January Reuters report asserting that Kenya has adequate foreign reserves despite the ongoing shortages which began in mid-2022 when Deputy President Rigathi Gachagua claimed that there was lack of foreign exchange in import oil but was denied by CBK saying all necessary funds were sourced from commercial banks.