Manufacturers Are To Blame For Dollar Shortage, National Treasury

The National Treasury has blamed manufacturers for an artificial shortage of dollars in the foreign exchange market following their public comments.

According to the National Treasury Principal Secretary Dr. Julius Muia, there is no shortage of the dollar but rather the negative sentiments from manufacturers that are pushing people to accumulate dollars.

Muia said that the manufacturers who have been complaining and giving negative sentiments concerning the dollar shortage have created panic in the foreign exchange market hence pushing people to accumulate the hard currency.

“This creates an artificial shortage which is not reflecting the reality on the ground,” said Muia during the launch of the latest World Bank’s Kenya Economic Update.

He went on to state that the government currently has enough foreign exchange reserves to cover the imports adding that there should not be any problem in terms of the availability of the dollar.

According to Central Bank of Kenya data, the foreign currency deposits held by Kenyans by end of March increased by 4 percent year-on-year to 780 billion shillings. The irony, however, is that this money is not available for trading.

Manufacturing firms such as Pwani Oil have already temporarily shut down their operations citing a dollar shortage that is making it difficult for them to source key raw materials.

Their sentiments have been backed by their lobby – the Kenya Association of Manufacturers (KAM), which has also insisted their members have had difficulty accessing dollars.

KAM has also disputed the CBK 116.95 exchange rate figure citing that the members are grappling with above 120 shillings on the ground.

The Central Bank of Kenya is yet to release data to show the extent to which Kenyans are stocking the dollar.

During volatile times, investors usually convert their valuables into strong currencies like the dollar or precious metals such as gold which act as a hedge against inflation.

This is what puts the local currency under pressure since most foreign currency will be leaving the country rather than coming into the country.

Manufacturers now want the CBK to intervene by making dollars available to FX traders, failure to which they say there will be no respite.