May 31, 2022 - Nairobi, Kenya - The ongoing dollar shortage in Kenya poses a significant threat to the manufacturing sector, according to the Kenya Association of Manufacturers (KAM).
The crisis is affecting the relationship between manufacturers and their suppliers, and risks damaging Kenya's reputation as an open market.
Many manufacturers are currently accessing the exchange rate at Sh 120 above the formally quoted rate of around Shs115-116, with KAM Chairperson Mucai Kunyiha attributing this to the reluctance of exporters to sell dollars at lower prices.
'The real market price is now above Shs120, and it is our belief that the differential is contributing to the shortage,' Kunyiha said in a statement.
As a result, manufacturers are being forced to plan for foreign currency payments by purchasing dollars in advance, leading to increased working capital and impacting daily operations.
Delays in acquiring the requisite USD for imports are also impacting relations with suppliers, with some now requiring more expensive Letters of Credit to transact.
In extreme cases, supplies have been cut or delayed as credit limits from suppliers have been breached, and this is feared to affect trade insurance in the future.
KAM has urged the Central Bank of Kenya to institute a policy that will return the market to predictability and ensure the supply of currency as and when needed, in order to restore confidence in the market.
