Central Bank of Kenya Governor Patrick Njoroge held a post-monetary policy committee (MPC) online Press briefing on May 31 during which he responded to questions on concerns by manufacturers about dollar shortages. Here are excerpts from that session:
The Kenya Association of Manufacturers says they are struggling to access dollars in a timely manner. What is CBK position? KAM [also] warned of a risk of a parallel fx [foreign exchange] market in Kenya because of dollar shortage. Are you concerned about this?
I would encourage you to talk to the Kenya Association of Manufacturers [because] they are the ones that are creating the story. You ask them what this is all about. It’s interesting that some of the people that are writing to us don’t even have positions. They are not in the market. They are traders. You talk to whoever has the story. The ‘pink’ paper [Business Daily] seems to also run the story. So you ask them.
In terms of where we are, there’s a market. The market covers a lot. 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.
They should understand that they are small in that sense and, sort of, go to the market like everyone else. There are no favourites in the market. Follow the rules of the market and everything will be okay. So I encourage you if you have those questions, go ask them. They seem to be the ones that are generating the questions.
As per CBK and KNBS data, the export revenues are rising and remittances are hitting record levels. So what explains the current dysfunction in USD interbank market?
Please ask the people that seem to claim that there’s a dysfunction in the market. It is important to understand that the market is a $2 billion per month market. That’s significant. If you have an actor coming in looking for $1 million, $10 million or even $10 million and claims that it’s dysfunctional, then I think kazi kwako [it’s your work to find out why].
What’s clear is that a few months ago — two months ago I think it was — there was significant demand, unusual demand mainly because of the dividends that were being paid out. That I think we all understood. But that whole season has ended. Money has been transferred, etcetera.
Of course, there have been other pressures from increase in prices of oil or the price of other products. That is coming through but the point is that it can very well be taken care of by the market.
If you go to the market and deal with the specific banks according to the rules of the market, and that means the banks, yourselves and indeed the dealers are aligned about how the markets operate. And for you as a customer, you don’t need to know the rules. Just go to the banks and present your information [on] what you are making the payments for etcetera.
Is CBK worried about a gradual decline in forex reserves?
We have sufficient reserves. We are using our reserves for payment of debt… and services that are needed for various components … [like] medicines and government imports. We are not worried about that because we do project these things well in advance.
We have a projection running two years from now and actually can go even further if we wanted to. But in a sense, for robust planning, we have at least a two-year horizon and we are quite comfortable about the levels that we will have on a monthly basis, weekly basis and even on a daily basis.
It’s about 4.9 months of import cover well above our four months of import cover that we generally have a recommendation for in context of EAC.
But actually, in most economies, there isn’t any agreement like the EAC’s. Three months’ import cover is sort of like the threshold that you should not get to.