Kenyans found hoarding dollars will be liable to a Ksh 10Million fine in newly proposed bill by Rongo Member of Parliament, Paul Abuor. According to the legislator, the bill will introduce measures to combat hoarding and to offer support for the Kenyan shilling so that it does not drop further against foreign currencies.
The shilling’s recent rout was blamed on the stockpiling of dollars by individuals and businesses in anticipation that the local unit would lose further ground against the greenback and other major world currencies.“Evidence suggests hoarding for speculation purposes and a lack of faith in the Kenyan economy because of the country’s current economic headwinds, most notably, excessive debt financing,” said Mr Abuor
The member of parliament has gone ahead to say that Persons found guilty of hoarding dollars for reasons excluding meeting import requirements and travel allowances face fines of up to Sh1 million or an imprisonment term not exceeding 10 years.Businesses and other organisations found culpable face fines of up to Sh10 million and the potential revocation of licences.
Currently Central Bank of Kenya quotes the shilling at 148.70 against the US dollar a great drop from 123.31 in December 2022. Some commercial banks are, however, selling a dollar for as much as Sh155, with the retail rate with Bank of Africa, for instance, selling the hard currency at Sh156.85.
There has been an increase in the stockpiling of foreign hard currency deposits, which stood at an all-time high of Sh1.248 trillion at the end of July. Concerns over the shilling’s stability forced the CBK to intervene in March through several measures, including re-opening the foreign exchange inter-bank market and issuing a forex code to guide hard currency transactions.
Other measures the financial regulator took to ease the pressure on the shilling include the government-to-government deal on the importation of fuel products earlier in the year, which was meant to lessen demand for dollars by enabling payments on oil shipments in local currency. The deal saw President William Ruto talk up prospects of the local shilling, forecasting the currency would rally to about 120 against the US dollar. While the local unit’s volatility has eased in the intervening period, the shilling is still down from the 135.91
Newly Proposed Regulations
The Draft 2023 Forex Hoarding Criminalisation Bill nevertheless intends to take away CBK’s role in overseeing the forex market by establishing a new entity known as the Forex Management Authority. The entity shall be a semi-autonomous regulatory body under the National Treasury. It shall be tasked with regulating and supervising the activities of market participants, including forex brokers, dealers, and other relevant entities to ensure integrity, transparency, and stability of the foreign exchange market.
The Forex Management Authority shall license, regulate, and supervise forex brokers and dealers, monitor compliance with applicable laws, and investigate and enforce penalties for violations or malpractices in the forex market.
The Forex Hoarding Criminalisation Bill plans to grant individuals and entities hoarding forex an amnesty of three months/90 days, after which the amounts must be converted into Kenyan shillings or attract tax at 15 percent. Further, the Bill provides a whistleblower provision where persons reporting forex hoarding activities in good faith shall be protected from retaliation and be entitled to 10 percent of the amount involved.
The new proposals come at a time Kenyans dread a further drop of the shilling against the dollar, seeing as the shilling has been weakening for nearly three and a half years now.
