Find ways of ending biting dollar shortage

The government should seek ways of flushing out speculators who could be hoarding dollars anticipating higher returns. [iStockphoto]

The government needs to resolve the shortage of the US dollar in the market that has seen the shilling-dollar exchange rate spiral out of control. The Central Bank of Kenya (CBK) on Wednesday published a rate of Sh129 to the dollar, banks and foreign exchange bureaus were selling a dollar at Sh145, putting into a corner the different industries that are heavy users of the dollar.

The shortage of the greenback has also been blamed for the specks of fuel shortages experienced in the country over the past two weeks. This is as oil marketing companies, who at the moment pay importers in dollars, appear unable to find enough dollars and therefore cannot evacuate their products in good time.

It is likely to get worse with manufacturers warning that they too cannot access the dollar and when they do, it is at a premium to the CBK published rate. This could see the cost of products they produce with the imported raw materials going up. Prices of imported goods could also go up.

The State needs to act to ensure Kenyans do not continue to hurt owing to the scarcity of dollars as well as the spread between the CBK rates and the rates offered by bank and forex bureaus.

The Energy and Petroleum Ministry, in a bid to ease demand on the dollar, has gotten into an agreement with three national oil companies (NOCs) from Gulf states that will start, next month, supplying petroleum products to Kenya on credit.

This is likely to have an impact over the six-month credit period. It means the $500 million that oil firms monthly to import fuel will not leave Kenya.

While this could work, there are concerns over what will happen after this period when Kenya will start to pay these NOCs. There are also concerns the country could be trading one problem with another - solving the dollar shortage but ending up with expensive petroleum products with extended credit periods coming with other costs.

Meanwhile, the government should seek ways of flushing out speculators who could be hoarding dollars anticipating higher returns should the shilling continue to weaken.