Banks Link Dollar Shortage To Dividend Payouts

April 27, 2022
3 Min Read

Commercial banks have linked dollar shortages in the money markets to dividend payouts by companies who are at present closing their books for the ended 2021 financial year.

This even as the lenders deny reports of orders to ration dollar sales by the Central Bank of Kenya (CBK) on the back of dollar shortages.

“The strong demand of dollars being felt in the market may be attributed to elevated demand over the last month or so as companies remit dividends to meet their overseas supplier obligations in the wake of the strong post COVID-19 recovery,” said Kenya Bankers Association (KBA) CEO Habil Olaka.While the CBK has assured banks of a balanced supply and demand of dollars, KBA admits some banks have experienced shortages and have taken the decision to ration supplies to manage their FX services to customers.

KBA has asked customers seeking large amounts of foreign currency to alert their banks early enough to allow them to source for the amount required in the market.

Earlier this month, the Kenya Association of Manufacturers (KAM) highlighted difficulties in obtaining U.S dollars from their banks.

“Many of our members have had challenges accessing U.S dollars from their banks to meet their international commitments in a timely manner. This puts a strain on supplier relations and the ability to negotiate favourable prices in spot markets,” noted KAM Chairman Mucai Kunyiha.

On its part, the CBK has previously insisted on ample liquidity in the forex exchange market to play down reports of limited supply of U.S dollars in the market.

“There is FX liquidity in the market and we continue to observe the market so there is proper behaviour as is required in operating these markets,” CBK Governor Patrick Njoroge said on March 30.

Externally, fears of a dollar shortage within the global financial system have been rife.

This is as investors move capital to the US dollar in anticipation of rising funds rates by the US Federal reserves.

The new development has seen major global currencies depreciate sharply against the green buck.

On its part, the shilling has continued its steady decline against the U.S dollar which has seen it fall by 2.3 per cent in the year to date.

The local unit was quoted at Ksh.115.74 against the U.S dollar at the close of trading on Tuesday according to CBK data.

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