CBK Governor Responds to Claims of Parallel Exchange Rates

The governor of Central Bank Kenya (CBK), Patrick Njoroge, has rubbished concerns that persistent dollar shortages have led to the emergence of a parallel exchange rate, where banks buy and sell above the official rate.

Manufacturers had claimed that constraints in dollar supply were forcing them to buy at more than Ksh120 compared to the central bank’s official average rate of Ksh116.84 per dollar.

Njoroge, however, scoffed at the claims stating that the foreign exchange market has enough dollars to meet demand from importers and corporates.

“The market generates and distributes something like $2 billion every month. So if you have somebody or a sector which is importing $90 million or $100 million, I think that’s nowhere near the $2 billion that we are putting out there,” said Njoroge.

KAM Chairman, Mucai Kunyiha, on Monday said the mismatch between dollar supply and demand has persisted for months and is causing manufacturers to buy dollars at costlier rates.

“This situation, compounded with the global challenges we are all facing, calls on the central bank and the Monetary Policy Committee to propose and implement policy actions that will return the market to predictability and crucially, to supplies of currency as and when needed in order to restore confidence in the market,” said Kunyiha.

CBK Boss acknowledged the spike in dollar demand that had hit the market, but stated that it has since normalised.