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Hoarding foreign currency for more than 45 days will be liable to a fine in excess of Sh1 million or ten years imprisonment if a proposed bill sails through the house.

Consequently, entities found guilty of hoarding forex beyond “their reasonable need” will also be liable to a fine not exceeding Sh10 million or have their relevant licences revoked.

The Forex Hoarding Bill sponsored by Rongo MP Paul Abuor is proposing stiffer penalties for those accumulating foreign currency for speculative purposes while offering amnesty to those willing to release the hoarded dollars into the market.

According to the Central Bank of Kenya (CBK), local foreign currency grew from Sh 800 billion in August last year to Sh1.2 trillion by the end of June 2023.

“Individuals or entities found guilty of repeated forex hoarding offences shall be subject to increased penalties, including higher fines and longer terms of imprisonment,” reads the draft bill in part.

It adds: “The forex hoarding Criminalisation Bill seeks to address the issue of forex hoarding in Kenya, which has adverse effects on the country’s economy. This bill aims to deter forex hoarding activities through criminal penalties and promote a stable forex market for the benefit of the Kenyan economy and its citizens.”

Despite the harsh penalties, the bill seeks to give amnesty of up to 90 days to those hoarding the currency to surrender it to the relevant authorities adding that during this, banks will have to surrender disclosure under the Central Bank Act.

According to the bill, amounts in the bank being hoarded should be converted into Kenyan shillings if not used or should attract a tax of 15 per cent.

Addressing a news conference yesterday, Abuor claimed that at the moment commercial banks are holding dollars worth Sh1.3 trillion while for those in safes and homes, the value is unknown.

Speculative purposes

He also said that there is evidence that suggests artificial hoarding for speculative purposes and also a lack of faith in the Kenyan economy because of the country’s headwind, most notably excessive debt financing.

Said Abuor: “We cannot however continue to be helpless and just watch the Kenyan shilling slide against the USD without action.”

In the bill, Abuor is proposing the establishment of the Forex Management Authority (FMA) under the Ministry of National Treasury and Economic Planning which will regulate and supervise the activities of market percipients including forex brokers, dealers and other relevant entities in order to ensure integrity, transparent and stability of the foreign exchange market.