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Firms caught stockpiling dollars beyond ‘reasonable’ needs face fines of up to Ksh10 million ($68,960) in proposals that seek to stamp out the hoarding of hard currency as the Kenyan shilling depreciates towards the 155 mark.

A draft Bill sponsored by Rongo MP Paul Abuor seeks to criminalise forex hoarding, defined as the accumulation of foreign currency for speculative purposes beyond ‘reasonable’ needs. It, however, does not properly define what constitutes ‘reasonable’ needs.

Persons found guilty of hoarding dollars for reasons excluding meeting import requirements and travel allowances face fines of up to Ksh1 million ($6,897) or an imprisonment term not exceeding 10 years. Businesses and other organisations found culpable face fines of up to Ksh10 million ($68,960) and the potential revocation of licences.

Read: Wealthy Kenyans' dollar stash in banks hit record $7.7bn

“The purpose of the Bill is to put in place measures to combat hoarding and to offer support for the Kenyan shilling, so that it does not slide further against foreign currencies, particularly the dollar,” Mr Abuor said on Wednesday.

“Evidence points to hoarding for speculation purposes and a lack of faith in the Kenyan economy because of the country’s current economic headwinds,” he added.

The mooting of the Bill comes as the local unit has shed 20.3 percent of its value against the greenback since the start of the year and by more than 31 percent since the beginning of 2022.

On Tuesday, the Central Bank of Kenya (CBK) quoted the shilling at 148.45 against the US dollar, a sharp drop from the 123.31 exchange rate at the end of December last year.

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. There has been an increase in the stockpiling of foreign hard currency deposits, which stood at an all-time high of Ksh1.248 trillion ($8.61 billion) at the end of July.

Read: Kenya shilling to weaken further

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 were the government-to-government deal on 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.

While the local unit’s volatility has eased in the intervening period, the shilling is still down from the 135.91 exchange rate at the end of April.