•The government’s fiscal agent is seeking to raise Sh10 billion monthly over the next four months
•The targeted Sh40 billion in foreign exchange reserves is expected to cushion the country from volatility in the global market over the Covid-19 pandemic
The Central Bank of Kenya last week bought Sh200 million worth of dollars to build the country’s foreign exchange reserves.
According to the CBK weekly bulletin, foreign exchange reserves grew marginally from Sh840.9 billion to Sh841.1 billion last week.
The bank targets Sh10 billion monthly over the next four months.
The cumulative Sh40 billion is expected to cushion the country from volatility in the global market over the Covid-19 pandemic.
''CBK sees an opportunity for such purchases given the development unfolding in the global markets and economy,'' the banking regulator said in a circular released last week.
Speaking to the Star, financial analyst Morris Ongili said CBK's move to buy dollars was a preemptive move to cushion the country from global volatility.
He lauded the lender's slow uptake of dollars adding that the decision would cause minimal disruptions to interest rates.
"It is good that they have started small. They will likely reach their target of Sh40 billion by June," he said.
Financial analyst Aly Khan Satchu told the Star that while CBK might have encouraged the commercial banks to hoard their dollars, in the end, no one other than the lenders themselves has an insight into their purchasing decisions.
“I fully expect the CBK to be able to complete their proposed amount and I am sure they are just as able to conduct transactions in the open market if they so desire,” he said.
Meanwhile, the International Monetary Fund’s decision on granting Kenya the $1.5 billion (Sh150 billion) precautionary standby credit facility is yet to be confirmed.
An IMF delegation from Washington that had been in the country from February 19 left last week, expressing satisfaction with the country’s fiscal progress.
Kenya has been operating without the facility meant to act as a buffer in case of external shocks since it expired in September 2018.
“The IMF facility is very important as it helps the country get new emergency dollars in the event that it has to burn significant foreign reserves in times of a current account crisis,” Thakar said.
He added that CBK’s decision to buy dollars from the open market was not an indication of failure to reach consensus with the IMF but rather a shift away from excessive external debt, which was previously boosting reserves.
On Monday, the Shilling was quoted at 102.67 compared to 102.55 on Friday. According to traders, the shilling weakened due to dollar demand from commercial banks beefing up their foreign reserves outweighing inflows from diaspora remittances.