•Kenya's reserves have fallen by at least Sh275 billion from $9.63 billion it was same time last year.weakens
•Reserves dropped Sh3 billion on Friday to $7.34 billion (Sh887 billion) billion from $7.37 billion.
Image: FILE
Kenya's foreign exchange reserve fell further the week ending September 9 as Central Bank released more dollars in the market to cushion the shilling from further weakening
The weekly bulletin by the apex bank shows reserves dropped Sh3 billion on Friday to $7.34 billion (Sh887 billion) billion from $7.37 billion (Sh884 billion) the previous week.
The usable foreign exchange reserves remained adequate at 4.19 months of import cover as at September 8 compared to 4.20 months the previous week.
"This meets the CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover," the regulator said in its latest weekly bulletin.
Even so, the country is in breach of East Africa's FX reserve policy where members are expected to have above 4.5 months of import cover at all times.
This is the fourth week Kenya's FX reserves are below the regional benchmark.
The reserve bank often sells an unspecified amount of dollars from the reserves pool to cushion the local currency by increasing the number of dollars circulating in the interbank and money markets.
Countries also rely on FX reserves to repay external debts. They are mostly dollar-denominated and act as buffers to potential external shocks for the country.
Kenya's reserves have fallen by at least Sh275 billion from $9.63 billion it was same time last year.
The reserves have sustained a downward trend in the past weeks as the apex bank uses part of its stockpile to stabilize the shilling against falling to a level that may disrupt the financial markets.
Apart from low export income, the country's diaspora remittances are now the leading contributor to FX reserves and have dropped in recent months due to high inflation in developed nations.
The amount of money sent home by Kenyans working abroad dropped for the sixth consecutive month in July.
Data by the CBK shows diaspora remittances to Kenya last month totaled $319.4 million (Sh38 billion) compared to $336.7 million (Sh40 billion) in July last year, a 5.1 per cent drop.
The inflows reported in July are the lowest since June last year when the country received $306 million.
This was almost Sh1 billion lower compared to $326.1 (Sh38.9 billion) sent in June and Sh2 billion less in May.
During the week, the shilling dropped further against major international currencies trading at 120.28 per US dollar on September 8, compared to 120.05 per US dollar on September 1.
Even so, CBK insisted that the shilling was stable against major international currencies.
The continued depreciation of the local currency against the dollar which has over 80 per cent acceptance in the international market is hurting households who are forced to carry the import burden passed to them by traders.
This is one of the reasons that saw the cost of living increase to a five-year high of 8.5 per cent in recent month's review.