Kenyan Bankers Association has refuted claims that the Central Bank of Kenya (CBK) has directed banks to limit the exchange of dollars as shortage bites
KBA Chief Executive Officer Dr Habil Olaka says while there has been a rising demand for the currency needed by importers to pay overseas suppliers, the ration could be measured being taken by individual banks which are experiencing a crunch.
“We have been in constant contact with CBK to address the strong demand of dollars in the market. The Central Bank, having best view of the market situation, has assured us that the market is well balanced in terms of supply and demand of dollars. The situation at individual bank level may differ leading to some banks experiencing a shortage and therefore taking decisions to help service their customers to the best of their ability,” said Dr Olaka.
Kenya shilling continues to weaken against the greenback and has so far crossed the 115 mark, an all-time low.
The local currency was mean rated at 115.74 against the greenback in early morning trade Wednesday having closed at 115.69 Tuesday.
Nonetheless, KBA attributes the strong dollar demand to increased demand by companies remitting dividends and making payments to suppliers in the wake of strong recovery after COVID-19 setbacks.
“However, the supply of foreign currency continues to grow supported by receipts from the country’s main exports and strong remittances inflows as evidenced by the CBK’s monthly remittances report. This we believe will stabilize in due course and market will revert to normal,” assured Dr Olaka.
Diaspora remittances recorded a monthly high in March, rising 25% to $363.6 million, compared to $290.8 million recorded in March 2021.
Within a year to March, cumulative inflows totalled $3.9 billion compared to $3.2 billion in the same period in 2021, a 21.6% increase.
“The strong remittances inflows continue to support the current account and the stability of the exchange rate. The US remains the largest source of remittances into Kenya, accounting for 58% in March 2022,” said CBK.
Similarly, usable foreign exchange reserves remained adequate at $8.5 billion equivalent to 5.04 months of import cover as of April which the regulator says is well above statutory requirement.
KBA says it will continue to engage CBK in order to address the currency imbalances as consumers now stare at rising prices of imported goods as local currency weakens.
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