Treasury says dollar shortage ‘artificial’

The National Treasury says the prevailing dollar shortage in the market has been created artificially by players in the FX market.

According to Treasury Principal Secretary Julius Muia who held a meeting with manufacturers on Monday, the reported dollar shortage is an outcome of the stockpiling of hard currency by manufacturers who have been operating in fear of a looming FX crunch.

“Sometimes it's just sentiment that causes a problem and that’s what I told manufacturers yesterday. If they work on the premise that there's a shortage of dollars and start accumulating hard currency more than they require, that creates an artificial shortage which doesn’t reflect the reality on the ground,” he said on Tuesday.

PS Muia insists adequate dollar supply remains as reflected by the Central Bank of Kenya (CBK) foreign currency reserves store.

“We have over five months of cover for imports and so there shouldn’t be a problem in terms of the availability of hard currency,” he added.

CBK’s official foreign exchange reserves which are largely dollar denominated rose $42 million (Ksh.4.9 billion) last week to stand at $8.219 billion (Ksh.960.8 billion) or an equivalent 4.89 months of Kenya’s imports demand.

Last week, CBK Governor Patrick Njoroge rubbished reports on dollar shortages by manufacturers insisting the claims were unsubstantiated.

““For a sector importing goods worth between $90 and $100 million monthly, the figure is nowhere near the $2 billion we are putting out there,” he said on May 31.

“Such players should understand that they are small in that sense and should go to market like anyone else. There are no favourites in the market. Follow the rules of the market and everything will be okay. It is interesting that some of the people writing to us don’t have positions and are not in the (FX) market, they are traders.”

This week, Pwani Oil said it had temporarily suspended operations at its plant after failing to obtain enough dollars from its bank to purchase raw materials.

Further, the manufacturer says it is now selling products in dollars with a view of accessing enough FX to meet required purchases and supplier payments.