Fear of Higher Prices and Product Shortages

Manufacturing and other local companies that rely on the dollar to import essential raw materials and inputs are at risk due to the continuous dollar scarcity.

Due to the shortfall, business transactions have slowed, harming the operations of raw material importers and oil marketers that bring in refined petroleum products.

Therefore, there is concern about price increases and shortages of necessities in the following days.

Importers are also becoming concerned about shilling’s decline, which is now trading at Sh124 to the dollar.

Gilbert Lagat, chief executive of the Shippers Council of Eastern Africa (SCEA), claimed that since November of last year, the availability of dollars has been constrained, prompting traders to reduce their imports.

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

He said that shippers’ ability to pay freight charges is impacted by currency depreciation.

“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.

Red Alert

The Kenya Association of Manufacturers (KAM) previously sounded the alarm about the dollar shortage on the market and its effects on the regional industry.

KAM claimed in a statement that the manufacturing industry is heavily reliant on imported raw materials and other processing inputs.

According to the lobbying group, due to manufacturers’ suppliers exceeding credit limitations, supply has been reduced or delayed, and there is concern that this may eventually have an impact on trade insurance.

KAM claimed in a statement that the manufacturing industry is heavily reliant on imported raw materials and other processing inputs.

According to the lobbying group, due to manufacturers’ suppliers exceeding credit limitations, supply has been reduced or delayed, and there is concern that this may eventually have an impact on trade insurance.

Manufacturers are being compelled to make advance purchases of foreign currency in order to prepare for foreign currency payments.

In addition, KAM has expressed concern that the time it takes to secure the necessary funds for imports is having an adverse effect on its long-standing relationships with suppliers since some of them now need more expensive Letters of Credit to conduct business.

CBK dismisses the assertions made by manufacturers and asserts that there is enough foreign currency in the country to meet demand.

However, in its Country Report published in late 2017, the International Monetary Fund stated that Kenya was going through a period of tight foreign exchange demand, along with decreased liquidity in the interbank foreign exchange market and a depreciation of the local currency as a result of the conflict in Ukraine.

According to the IMF, Kenya is coping with a challenging global environment that includes fluctuating commodity prices, slower growth in important trading partners, and limited access to international financial markets for frontier markets.