Bloomberg reports more than $200 million has left the local bond market as investors chase higher United States yields.
Raising the share of deposits banks must lock up at the central bank (from 11 percent to 13.5 percent in late September) has not stopped the shilling slide.
Further squeezing liquidity is unlikely to work. It mainly reduces the money banks have available to lend, pushing up borrowing costs and slowing private-sector activity at a time when credit is already expensive.
Within the existing liberalised foreign-exchange framework, a better approach is to open a dedicated window for essential energy imports, introduce temporary rules against rapid foreign-currency deposit hoarding, correct timing gaps in customs valuation, and selectively raise Treasury bond yields so that local bonds again offer an attractive return relative to United States yields—without threatening debt sustainability.
Holding reserves steady while taking these steps can slow the rush for dollars, bring portfolio investors back, and support stability.
Rwakakamba Morrison, Coffee Farmer, Rukungiri District