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Fears of price hikes, shortages of goods 

forex bureau dollar

A client holds US dollar notes at forex bureau in Nairobi. The ongoing dollar shortage is posing a threat to manufacturing and other local industries which rely on the greenback to import key raw materials and inputs.

Photo credit: File | Nation Media Group

The ongoing dollar shortage is posing a threat to manufacturing and other local industries which rely on the greenback to import key raw materials and inputs.

The shortage has slowed down commercial transactions, hurting operations of importers of raw materials and oil marketers who ship in refined petroleum products.

As a result, there’s fear of price hikes and shortages of essential goods in the coming days.

The depreciation of the shilling, which is currently selling at Sh124 to the dollar, is also raising concern among importers.

Shippers Council of Eastern Africa (SCEA) chief executive Gilbert Lagat said there has been a strain on the availability of dollars since November last year, forcing traders to cut down on their imports. 

“In the past one year, the shilling has fallen, losing its purchasing power and pushing up the cost of goods,” said Mr Lagat.

He said the currency depreciation affects payment of freight charges by shippers.

“We anticipate a shortage of goods and a rise in prices as freight charges and the cost of imported goods have significantly increased due to inflation and dollar shortage,” added Mr Lagat.

Weston Logistics Ltd executive director Salim Naseeb, a major player in the clearing and forwarding sector in the region, also lamented at the high cost of doing business at the port of Mombasa.

“There is a bill of lading and delivering fee that we reluctantly accepted after it was introduced some months ago. The Kenya Maritime Authority is collecting so many unjustifiable fees and which importers are passing on to consumers,” said Mr Naseeb.

Red flag

Earlier, the Kenya Association of Manufacturers (KAM) raised the red flag over the shortage of dollars in the market and the impact on local industries.

In a statement, KAM said the manufacturing sector is highly dependent on imported raw materials and other inputs for processing. 

The lobby group says supplies have been cut or delayed as credit limits from manufacturers’ suppliers are breached and there’s fear this may affect trade insurance in future.

KAM is urging the Central Bank of Kenya to implement policy actions that will return the foreign exchage market to predictability and restore the supply of foreign exchange.

Manufacturers have been forced to plan for foreign currency payments by purchasing foreign currency in advance.

Besides, KAM has decried that the delays in acquiring the requisite dollars for imports are impacting relations with suppliers, which have been built over time, with some now requiring more expensive Letters of Credit to transact.

CBK says the country has sufficient foreign currency to meet demand, brushing off the claims made by manufacturers.

But late last year, the International Monetary Fund revealed in its Country Report that Kenya is experiencing a period of tight foreign exchange demand, accompanied by reduced liquidity in the interbank foreign exchange market and a depreciation of the local currency following the war in Ukraine.

According to the IMF, Kenya is navigating a turbulent global backdrop marked by volatile commodity prices, slowing growth in key trading partners, and constrained frontier market access to international capital markets.