- According to the Central Bank of Kenya, the usable foreign exchange remained adequate at $7,928 million representing 4.87 months of import cover as of November 19.
The Central bank of Kenya’s official foreign exchange reserves has dropped to 867.72 billion between November 12th and 19th, 2020 as showed by new data revealing the lowest of reserves held since May 2020.
The data has in turn raised the risks on short-term stocks on the Kenyan Economy.
The report by the Central Bank of Kenya shows that reserves dropped from Sh 891.11 billion as recorded on November 12th to Ksh. 867.72 billion as of November 19th representing 4.87 months of import cover.
This is the lowest amount of reserves held since May 7th, 2020 when funds were recorded at 4.7 months of import cover.
The reserves have however continued to surpass the required statutory minimum of supporting at least four months of import cover despite the huge drop.
According to the Central Bank of Kenya, the usable foreign exchange remained adequate at $7,928 million representing 4.87 months of import cover as of November 19.
“This meets the Central Bank of Kenya’s statutory requirement to endeavor to maintain at least four months of import cover, and the East African Community (EAC) ‘s region convergence criteria of 4.5 months of import cover,” said the CBK.
The country has also recorded a rise in the export earnings on an improved economy as showed by the Kenya Bureau of Statistics data which showed that the export grew by six percent in nine months since January.
The bank normally uses the reserves earned from the remittance inflows, foreign debt dollar purchases from the Treasury, tourism and export earnings to service foreign debt, support the shilling and facilitate payment of both private sector and government’s imports In foreign currencies market.
The shilling is currently trading at 109.45 units to the dollar, from 107.71 per unit on July 30.
The bank however does not disclose its operations in the foreign exchange market and normally comes in to sell dollars when the shilling is deemed to be depreciating too fast against the dollar, or otherwise buys forex if the shilling gains too quickly.
The reserves could come under deeper strain following the several debt repayment obligations which are yet to follow.
The data by the National Exchequer shows cumulative debt service costs amounted to Ksh. 246.29 from June to September 2020 following the Covid-19 pandemic.
This is because the forex reserves have in the past few months been dependent on loans for Corona Virus related support from international financing institutions such as the World Bank, International Monetary Fund, and Africa Development Bank.