Despite a warning from President William Ruto and a proposed forex hoarding criminalization bill, dollar hoarders have been gaining big.
This is due to the depreciating Kenyan shilling.
In March this year, the Head of State advised Kenyans against hoarding dollars saying the market would be different in weeks and they may end up getting losses.
“I am giving you free advice that those of you who are hoarding dollars you shortly might go into losses. You better do what you must do because this market is going to be different in a couple of weeks,” President Ruto stated then at the Nairobi Securities Exchange.
Moreover, the shilling’s free fall has been blamed on the stockpiling of dollars by individuals and businesses.
This stockpiling has been in anticipation that the local unit would lose further ground against the dollar and other major world currencies.
Also Read: President Ruto Issues Statement on Dollar Demand by Kenyans
Additionally, on 4th October, Rongo Member of Parliament Paul Abuor sponsored a proposed bill that was to lead greenback holders to pay up a levy for holding dollars.
The proposed Forex Hoarding Criminalization Bill, 2023 is seeking to have Kenyans pay up to 15 per cent of the value of dollars held in their custody for more than an allowed period of 45 days.
According to the lawmaker, the move seeks to combat the hoarding of the US dollar and to offer support to the Kenyan Shilling so that it does not fall further against foreign currencies.
However, despite this, dollar hoarders are winning big.
CBK Gains After Dollar Depreciation
In the year ended June, the Central Bank of Kenya (CBK) doubled the unrealized exchange gains on its dollar reserves to Sh131.5 billion.
This is in comparison from Sh68.6 billion a year earlier on the back of a significant weakening of the Kenyan shilling.
According to the regulator’s latest annual report, the rise in the value of forex holdings at the Central Bank helped raise its net surplus for the year to Sh150.5 billion from Sh76.9 billion in the year to June 2022.
A spot check done by The Kenya Times, reveals that the dollar currently buys at Kshs 146.25 and sells at Kshs 155.45 at the Equity bank.
Furthermore, at the National Bank, the dollar buys at Kshs 144.85 and sells at Kshs 154.95.
According to Statista, 1 U.S. dollar was worth on average 137.26 Kenyan shillings s pf May 2023.
Also Read: Atwoli Opposes Proposal to Prohibit Dollar Hoarding
In addition, the lowest exchange rate in Kenya was registered in February 2020, when one U.S. dollar could buy 100.79 Kenyan shillings.
Notably, as of August 2023, the shilling had recorded a depreciation of 17.65% to the dollar, compared to the 9.04% depreciation for the year ended December 2022.
