Nairobi — The Kenya Association of Manufacturers has warned that the ongoing dollar shortage in the country poses a serious threat to the sector members who rely on dollars to import key raw materials and inputs for processing and capital goods for investment.

The crisis, KAM warned is affecting the relationship of manufacturers with suppliers and risks destroying Kenya's reputation as an open market.

The lobby group has also raised an alarm that currently, most of its members are accessing the exchange rate at Sh 120 above the formally quoted exchange rate of around Shs115-116.

"The real market price ( as evidenced in our purchases ) is now above Shs120 and it is our belief that the differential is contributing to the shortage. Exporters and other entities holding USD are reluctant to sell the dollar at lower prices as it is clear and visible to them what the market value of the currency is," KAM Chairperson Mucai Kunyiha said in a statement.

The crisis, Kunyiha said, has forced most of the manufacturers to buy most of the dollars in advance, thereby affecting their daily operations.

"Manufacturers have been forced to plan for foreign currency payments by purchasing foreign currency in advance resulting in an increase in working," KAM noted.

Besides, KAM has decried that the delays in acquiring the requisite USD for imports are impacting relations with suppliers, which have been built over time, with some now requiring more expensive Letters of Credit to transact.

"In the most extreme cases, supplies have been cut or delayed as credit limits from the manufacturers ' suppliers have been breached. This is also feared to affect trade insurance in the future

KAM has therefore urged the Central Bank of Kenya to institute a policy that will return the market to predictability and, crucially , to supplies of currency as and when needed in order to restore confidence in the market

"This is extremely worrying Kenya has painstakingly built a reputation as an ' open market ' that has enabled us to trade on favorable terms with the world," KAM said.