Currency exchange ban weakens shilling at border town

Currency exchange ban weakens shilling at border town.
The recent ban on the exchange of the Kenyan currency by the Tanzanian and Ugandan governments has wiped out its value at the border points.

A spot check by The Standard at the Busia border yesterday revealed that the Kenya shilling, which had been exchanging at 37 units of the Uganda shilling, now can only fetch you 32 units.

Central Bank of Kenya, however, put the official exchange rate at 37 units for the Uganda shilling. “The value of the Kenyan money has depreciated, and this is affecting our businesses,” said John Omondi, a boda boda rider on the Kenyan side of the border.

Tanzania and Uganda banned the exchange of the local currency following the introduction of new banknotes and the impending phasing out of the old Sh1,000 notes by October.

In yesterday’s trading, the shilling also dipped to 102.08 against the dollar, a level last seen on January 3, according to traders.

Excess liquidity

One trader told Reuters the local currency is forecast to weaken against the dollar due to excess liquidity in the money markets.

Besides the rapid depreciation of the Kenyan unit in the wake of the exchange ban, the new currency’s likeliness to that of Ugandan has also seen some traders in the border towns of Busia and Malaba to reject it.

“The new currency looks similar to that one of Uganda, especially the colour. We fear that at night we could mistake the Kenyan money for that of Uganda, thus incurring losses,” said a fishmonger at Busia Fish Market yesterday.

“To avoid that, I have decided not to receive any new currency. I do not know why the Government did not do some due diligence to establish that the currency resembles Uganda’s,” she added.

Bungoma Senator Moses Wetang’ula called for public sensitisation on the new currency so as to boost its acceptance among locals.

He also warned of the risk of widespread counterfeiting of the new currency.

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