Editorials
Avoid draconian rules in a free forex market
Friday October 06 2023
Firms caught stockpiling dollars beyond ‘reasonable’ needs face fines of up to Sh10 million. PHOTO | SHUTTERSTOCK
The issue of dollars and their supply has hit the headlines this year, brought to light by the effect of market inefficiencies on the import market, and the exchange rate.
Now, a draft Bill sponsored by Rongo MP Paul Abuor seeks to criminalise forex hoarding. The Bill will inevitably bring up debate on how much control the country can impose on the foreign exchange market, and the effect on the shilling if dollar holdings begin to be monitored.
One of the questions concerns what will constitute holding dollars beyond reasonable needs. Businesses hold dollars based on projections of needs in future, and in a liberalised economy, it is also not a crime to hold hard currency for trading or investment. These are some of the principles that uphold a functioning forex sector and guarantee supply to those who need dollars.
The country has in the past run a controlled forex market, which had to end when the economy was liberalised.
Unless there are plans to return to a controlled market, draconian forex controls are out of place.
