Kenya restricts sale of dollars by remittance firms amid dwindling forex reserves

The Central Bank of Kenya (CBK) on Thursday restricted the amount of U.S. dollars firms that remit money abroad can sell to customers per day, as it seeks to control the market amid dwindling forex reserves.

Gerald Nyaoma, director of the Bank Supervision Department at the CBK, said the firms will only be allowed to transact a maximum of 100,000 dollars per customer per day, and for any amount exceeding the limit, they would have to go through commercial banks.

He added that “the move will create a fair and orderly market” as well as “enhance transparent practices to improve liquidity in the forex wholesale market.”

Nyaoma said the action had been taken after the central bank observed increased participation of money remittance firms in the forex wholesale market without complying with various guidelines and standards that are in place.

The restriction came at a time when the Kenyan shilling is in free fall, losing 20 percent against the dollar in the last year.

The shilling stood at 147 against the dollar on Thursday, a decline from 120 in September 2022.

The fall of the shilling has partly been blamed on dwindling forex reserves that stood at a low of 7.05 billion dollars or 3.81 months of import cover on Sept. 8, according to the apex bank.

While this is below the East African region’s requisite of 4.1 months of import cover, the CBK said the reserves are adequate.