For weeks now, the Central Bank of Kenya (CBK) has denied claims that the country is short of the US Dollar.
US Dollar is an important currency, especially for exporters, importers, and forex exchanges in banks and other financial institutions.
Lack of it or low circulation causes a lot of pain and agony in the above-mentioned very important sectors of the economy.
For the weeks leading to the raging debate online, and of course, offline, it appears like CBK is lying. Because it is clear to see the effects of low dollar circulation.
A faceless twitter account named @NotCBKKenya shared a thread about an insider at Central Bank complaining about the US dollar shortage and how the issue has been muzzled.
“”I have spent over 24 years of my professional life dealing with foreign exchange in Kenya, Dubai and Singapore. The current FX issues in Kenya have been going on for nearly two years. The foreign exchange interbank market has been dysfunctional during this time. “In such an environment the only source of dollars for commercial banks is via either exporters selling to them or the central bank of kenya selling their Foreign exchange reserves to them. “However, the central bank of kenya is fixated with the KES1 screen price and doesn’t allow commercial banks to buy dollars from exporters at rates above the official screen price which is currently around 116,” the complaint began.
The rest is shared in that thread, see link below:
“”With regards to why the central bank is not selling dollars into the market, it either has to do with the governments upcoming bloated dollar debt repayments or IMF restrictions under their current ECF program or both. But more importantly, the issue now in the FX market seems to have moved away from a pricing and liquidity issue, to a crisis of confidence,” he adds.
He offers that “The only solution right now is to devalue the currency to a level that would make it compelling for exporters that are hoarding to sell their dollars into the market. This could start with unifying the two exchange rates in the market.”
Ending with a dire warning, “However, if the dollar shortage issue is not urgently addressed, there will be no economy for the new president to manage in a few months time”
The thread elicited a good debate. Some were not so happy with the way he put things.
Also, one commentator showed why the parallel dollar exchange market is thriving.
Parallel market gaining traction
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