Kenyan government promises to ‘fix’ biting shortage of US dollars “within weeks”

By Steven OTIENO

Currency traders should expect the country’s current dollar shortage to ease ‘within weeks’ as the government bows to pressure to tame what is believed to be dollar-hoarding tactics by some forex traders.

The dollar shortage continues to harshly impact commercial transactions, leading to the proliferation of forex bureaus and a black market as commercial banks raised their rate to as high as Ksh145.5 per unit as of last evening.

Speaking yesterday when he officiated the listing of Laptrust REIT at the Nairobi Securities Exchange (NSE), President William Ruto stated that the Government had taken measures to ensure dollar availability in the near future –a sigh of relief to the local market’s declining forex reserve.

“For the people who work numbers, I am giving you free advice that those of you who are hoarding dollars, you shortly might go into losses,” warned Ruto in his address.

Adding, “I want to assure those in Kenya who are facing challenges of access to dollars that we have taken steps to ensure dollar availability in the next couple of weeks,” stated Ruto, hitting at forex traders.

Ruto said his administration’s strategy would be two-fold, with the first being reinstating the interbank exchange market which will see the re-establishment of a system where banks and financial institutions can trade currencies freely with each other.

“Through the Central Bank, we are having conversations to reinstate the interbank exchange market that has since not worked. I am happy that the players in that sector, including our banks, are participating,” noted Ruto.

Noting that such a move would enable banks to access foreign currencies easily and at friendlier rates, thereby reducing their transaction costs.

This comes after the price of buying dollars in banking halls and forex bureaus yesterday crossed a record Sh145 per unit, widening the spread between the official and open market rates, and creating a black market for the US currency due to the ongoing shortage, and one that Ruto believes can be fully resolved within six months from this week.

Most commercial banks were yesterday selling dollars to customers at between Sh140.55 and Sh144.50 while buying the greenback at between 128.20 and Sh131.40 per unit.

On the other hand, consumers are buying dollars between Sh141 and Sh146 per unit in forex bureaus, who are getting the US currency between Sh135 and Sh138.

Similarly, the government is banking on last week’s signed deals with Saudi Aramco and Abu Dhabi National Oil Company (Adnoc), in a move that will see local oil companies allowed to pay for oil imported on credit through a government-to-government deal in Kenya shillings to ease pressure on the local currency that continues to hit new record lows.

The deal will see the former supply Kenya with diesel and super for the next six months, while Abu Dhabi National Oil Company (Adnoc) will deliver three cargoes of super petrol every month.

According to Energy CS Davies Chirchir, the government invited offers from government-owned entities in the Middle East for the supply of fuel for 270 days.

Suppliers nominated in the deal will then sell the fuel to the rest of the local players in Kenyan – denominated currency, and will not need dollars to secure their orders.

The arrangement will see the State shoulder the currency risk through a Letter of Support to back those oil marketers that will be dealing with the Middle East oil suppliers.

Yesterday also saw an announcement of a coordinated central bank action between ECB and other major central banks to offer 7-day US dollar operations on a daily basis, in what comes as a major reprieve to the weakening Shilling value.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank form part of the deal meant to enhance the provision of US dollar liquidity.

The new frequency effective as of 20 March 2023, is to remain in place at least through the end of April to support the smooth functioning of US dollar funding markets.