VenturesNow

Massive job losses loom in Kenya as US Dollar shortages persist

Published

2 years ago

June 8, 2022

Workers in the private sector in Kenya are on the verge of losing their jobs following an acute shortage of the dollar which could trigger manufacturing firms to shut down or suspend operations as they try to navigate cash flow problems.

The fears were raised barely a week after the Kenya Association of Manufacturers (KAM) warned that most of its members are facing challenges accessing the dollar.

According to the KAM, firms like Pwani Oil, the manufacturer behind the Salit Oil, Mpishi Poa, and Fresh Fry cooking oil products, has announced a temporary halt of its operations, citing dollar shortage which has hindered it from sourcing key commodities.

KAM Chairperson Mucai Kunyiha on May 30, had said manufacturers have been forced to plan for foreign currency payments by purchasing foreign currency in advance resulting in an increase in working capital.

A foremost Kenyan economist, Ken Gichinfa who spoke on a radio programme on Wednesday, said with sufficient dollars in reserves, the shortage is being occasioned by pent-up demand for the dollars which has led to the depreciation of the Kenyan shilling.

“The worst-case scenario is that many firms will shut down resulting in job losses escalating due to manufacturers struggling to meet their obligations.

“If the situation remains unresolved, the business community involved with importation, like manufacturers and car dealers, will be largely affected and might lead to further closure and job losses,” Gichinga said.

But in response to the fears, the Kenyan Central Bank (CBK) accused the manufacturers of causing the scarcity of the dollars.

“The manufacturers should understand that they are small in that sense and sort of go to the market like everyone else. There are no favorites in the market. Follow the rules of the market and everything will be okay,” the CBK head, Patrick Ngugi Njoroge had previously remarked.

Kenya is already battling rising inflation which has heightened the cost of living with fuel and food prices rising.

The costs of producing goods and services remained at an 8-year high driven by rising fuel prices, higher taxes, and input shortages which forced many firms to scale back on output and employment levels.

Related Topics:Dollars Economy Featured Kenya

Click to comment

VenturesNow

IMF mission concludes 4th loan program assessment in Egypt

Published

6 hours ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

VenturesNow

Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.