Forex cover decreases by Sh3.5bn, at 9-week low
- Data from Central Bank of Kenya shows that the reserves fell by $34 million or Sh3.53 billion last week.
- This is, however, a smaller decline compared to the previous week’s $134 million (Sh13.9 billion) drop.
The official forex reserves held at the Central Bank of Kenya (CBK) dropped further last week by Sh3.53 billion to Sh957 billion, touching a nine-week low.
Data from Central Bank of Kenya shows that the reserves fell by $34 million or Sh3.53 billion last week, which was, however, a smaller decline compared to the previous week’s $134 million (Sh13.9 billion) drop. CBK noted in the bulletin that the reserves remain sufficient, exceeding both the country’s and EAC minimum threshold of import cover.
“The CBK usable foreign exchange reserves remained adequate at $9.218 billion (5.76 months of import cover) as at September 5. This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover and the EAC region’s convergence criteria of 4.5 months of import cover,” said CBK in its latest weekly bulletin.
The cover level is the lowest since July 4, when they stood at $9.02 billion equivalent to 5.74 months of import cover.
The falling reserves have come at a time the dollar demand has gone up, putting pressure on the shilling’s exchange rate that stood at 103.82 at close of trading last week.
Although the CBK can intervene by selling dollars into the market to stave off volatility, regulator does not disclose when it intervenes in the market either by buying or selling dollars, and the amounts involved.
Tracking dollar sales of purchases is made more difficult by the fact that as the government’s fiscal agent, CBK also handles from the reserves kitty outward payments such as interest on external debt, and external government purchases.