The Kenya Association of Manufacturers (KAM) revealed that importers are paying over Sh120 per dollar in unofficial markets, far exceeding the central bank's official rate of 116.81 as of late May 2022. This discrepancy has created operational challenges for businesses reliant on foreign currency.
KAM chairman Mucai Kunyiha stated that manufacturers face severe difficulties accessing dollars at official rates, forcing them to pay premiums in unregulated channels. "The real market price is now above Sh120," he said, noting that interbank trading has stalled, worsening currency scarcity.
The crisis has intensified pressure on businesses already grappling with global supply chain disruptions and rising raw material costs. Manufacturers, among Kenya's largest importers, report increased working capital demands as they pre-purchase dollars to meet supplier obligations.
International financial institutions have highlighted the risks of sustained exchange rate divergence. An IMF working paper noted that prolonged gaps between official and parallel rates can create shadow markets with destabilizing effects. This aligns with KAM's warning about "unwanted consequences" from the current situation.
The central bank's governor, Patrick Njoroge, took office in 2015 and has maintained Kenya has a flexible rate policy, intervening only to smooth volatility. In 2018, the IMF suggested the shilling was overvalued, a claim disputed by the central bank.
Recent data shows the shilling has depreciated significantly against the dollar, trading at Sh116.71 in late May 2022 compared to Sh104.44 in March 2020. This decline, coupled with increased import demand following economic reopening, has exacerbated liquidity constraints.
