© Reuters.
The Central Bank of Kenya (CBK) has imposed a limit on the amount of U.S. dollars that money remittance firms can sell to customers each day, in an attempt to regulate the market amid declining forex reserves. The directive, which was implemented on Thursday, restricts these firms to transactions of a maximum of $100,000 per customer per day. Any amount exceeding this limit must be processed through commercial banks.
Gerald Nyaoma, director of the Bank Supervision Department at the CBK, stated that this measure aims to establish a fair and orderly market and enhance transparent practices to improve liquidity in the forex wholesale market. This action follows observations of increased participation from money remittance firms in the forex wholesale market without adherence to existing guidelines and standards.
This restriction comes during a period of depreciation for the Kenyan shilling, which has lost 20% against the dollar over the past year. On Thursday, the shilling stood at 147 against the dollar, marking a decline from 120 in September 2022. The falling value of the shilling has been attributed in part to dwindling forex reserves, which were reported as $7.05 billion or 3.81 months of import cover on Sept. 8 by the apex bank.
Despite these figures being below the East African region’s requisite of 4.1 months of import cover, the CBK maintains that the reserves are adequate.
The CBK’s new order targets Money Remittance Providers (MRPs), with 20 institutions currently authorized under money remittance regulations to conduct such business. As authorized dealers under the CBK act, these institutions are permitted to conduct foreign exchange (FX) business.
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