Nairobi, KENYA
Official foreign exchange reserves dipped
to a four-month low in the week to September 26, making it the first time that
they fell below $9 billion since the sale of the third Eurobond in May.
Data
from the Central Bank of Kenya (CBK) indicates that the reserves stood at
$8.985 billion or Sh931.7 billion, the lowest level since May 23 when they
stood at $7.981 billion.
The
third Eurobond cash was reflected in the CBK’s account just a week after May 23
when the total reserves jumped to a new high of $10.06 billion when the
regulator bought the dollars from the Treasury. The Eurobond raised Sh210
billion ($2 billion) thereby helping increase the forex pile and stabilise the
local currency.
The
latest decline in reserves continues the trend seen in recent months. The fall
started on July 18 when the figure stood at $9.747 billion after a rise in the
preceding week, and have continued every week to date.
The
CBK has lately been facing pressure to keep the currency stable, mopping tens
of billions of shillings from the market. Last week, the CBK went into the
market with a term auction deposit (TAD) offering 8.98 percent, which is close
to the maximum allowable level or the Central Bank Rate of 9.00 percent.
Though
the CBK uses its foreign exchange reserves to buy local currency from the
market or sell forex to banks, it does not disclose when it makes such
transactions. The CBK also spends forex in repaying foreign debt, which stood
at Sh3.02 trillion or 52 percent of total public debt as at the end of June
this year.
Despite
the recent fall in reserves, the CBK and some analysts maintained that the
forex levels are enough to provide adequate cover for import costs, noting the
minimum statutory and regional limits were met.
“The
CBK usable foreign exchange reserves remained adequate at $8,985 million (5.61
months of import cover) as at September 26. 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 the
CBK.
Investment
firm Cytonn echoed CBK’s sentiments saying: “High levels of forex reserves
continue to provide adequate cover and a buffer against short-term shocks in
the foreign exchange market.” – Daily Nation
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