Kenya Association of Manufacturers(KAM) has raised the red flag over the shortage of US dollars in the market and the impact on local industries.
In a statement, KAM said the manufacturing sector is highly dependent on imported raw materials and other inputs for processing and capital goods for investment. As a result, local industries require sufficient dollars to access raw materials and intermediate inputs and capital goods. However, this has not been the case.
In a statement, KAM said the current high commodity prices in the international market had increased the US$ required to purchase the same quantities of products.
Before the COVID-19 pandemic, crude palm oil prices were around $ 700 per metric tonne but rose to 1980/mt in March 2022. Oil, metals and other commodities and inputs have mostly gone up.
KAM CONCERNS ON DOLLAR SHORTAGE
KAM said in a statement that manufacturers had been forced to plan for currency payments by purchasing foreign currency in advance, increasing working capital as they struggle to obtain sufficient dollars to meet their dollar obligations on time from commercial banks.
The lobby group says supplies have been cut or delayed as credit limits from manufacturers’ suppliers are breached. This is also feared to affect trade insurance in the future.
Although the formal exchange rate for the US$ is quoted at around KSh 115-116, none of the KAM members can access forex at that price in the market.
Neither can banks trade dollars between themselves, further exacerbating the supply constraints.
KAM is urging the Central Bank of Kenya(CBK) to implement policy actions that will return the forex market to predictability and restore the supply of forex.
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