It will soon cost you to hold on to the US dollar for more than 45 days if a new draft law sees the light of day.
The proposed Forex Hoarding Criminalisation Bill, 2023 wants Kenyans to pay up to 15 per cent of the value of dollars held in their custody for more than an allowed period of 45 days.
The sponsor of the proposed Bill, Rongo MP Paul Abuor, said the move seeks to combat the hoarding of the US dollar and to offer support to the Kenyan Shilling so that it does not slide further against foreign currencies.
The Bill proposes stiff penalties to individuals and entities accumulating foreign currencies for speculative purposes resulting in scarcity of foreign exchange.
It offers amnesty to those who are willing to release hoarded dollars into the market once the Bill becomes law.
"We cannot continue to be helpless and just watch the Kenyan Shillings slide against the US dollar without taking action," Abuor said.
Under the proposal, anyone found holding foreign currency above 45 days will pay a fine of not exceeding Sh1 million or a jail term of 10 years for individuals.
For entities, they will be paid a Sh10 million fine or have their licenses revoked.
The proposed Bill comes against the backdrop of the Kenya shilling dropping by more than 14 per cent against the US dollar since January.
In the global arena, the drop in the value of the shilling has been attributed mainly to a reduction in oil supply by Opec countries as well as the ongoing Russia-Ukraine war.
“In the country, there is evidence that suggests artificial hoarding for speculation purposes and lack of faith in the Kenyan economy because of the country’s current headwinds, most notably excessive debt financing,” Abuor stated.
According to Central Bank of Kenya data, local foreign currency deposits grew from Sh800 billion in August 2022 to Sh1.2 trillion by the end of July 2023.
According to the draft Bill, it shall be unlawful for any person or entity to engage in forex hoarding beyond their reasonable needs.
“The Central Bank of Kenya shall establish guidelines and thresholds for determining what constitutes reasonable needs in consultation with relevant stakeholders,” the Bill says.
It further says any person or company who has bought forex must make returns to Forex Authority within 14 days on how the foreign currency was used, for example importing goods, travelling or settling bills.
Banks and forex bureaus will be required to the Forex Authority for all huge transactions for purposes of ensuring compliance.
“You are all aware that the Kenyan foreign exchange market uses a free-floating exchange rate that is established solely by market forces where one is free to buy or sell dollars and operate a forex account,” Abuor said.
He added that the Bill, once implemented, will lower the cost of living and alleviate some pressure from the Kenya shilling.
The draft Bill further says whistleblowers who report forex hoarding activities in good faith will be protected and entitled to 10 per cent of the amount involved.
“The law shall provide mechanisms for anonymous reporting. It shall establish appropriate channels for reporting such activities,” the document states.
It adds that the authority will conduct public awareness on the negative impact of forex hoarding on the economy.