•As at first of December the usable foreign exchange reserves were at USD 7,070 million (Sh868 billion) or about 3.96 months of import cover.
•This is the second month in a row that Kenya’s FX reserves are below the regional benchmark.
Image: EZEKIEL AMING'A
Kenya's cost of finance coupled with reduced market access has depleted foreign exchange reserves making it difficult for businesses.
This is according to the outgoing Treasury Permanent Secretary Julius Muia who spoke during a hand over session to the new Treasury PS Chris Kiptoo.
Muia said reduced forex reserve has eroded the capacity to service import requirements of goods and services.
Central Bank of Kenya data shows that Kenya is currently in breach of East Africa’s forex reserves policy, where members are expected to have above 4.5 months of import cover at all times.
As at December 1, the usable foreign exchange reserves were USD 7,070 million (Sh868 billion) or about 3.96 months of import cover.
This is a drop from USD 7, 213 million (Sh885 billion) as at November 3 which was 4.04 months of import cover.
This is the second month that Kenya’s forex reserve is below the regional benchmark.
The last time the forex reserve stood at such a level was around electioneering period in October 2017.
Treasury Cabinet Secretary Njuguna Ndung’u who witnessed the handing over said the government would focus on protecting private investments in an effort to help enterprises overcome the tough operating environment.
“We are now focusing on economic recovery from shocks and it is our job to design how the economy will recover from that,” said Ndung’u.
He said the government has set interventions in the market to help manufacturers expand productivity and increase incomes
“Market measures such as the Hustler Fund can help the economy. So far we have seen people borrow to a tune of Sh5.1 billion shillings,” said Ndung’u
Kenya is seeking a fresh Sh91.9b World Bank loan to fund budget and stabilise the economy.
The appeal for the new facility comes nine months after the lender gave Kenya a similar amount as part of recovery support from the ravages of the Covid-19 pandemic o the economy.
The new PS James Muhati said the Treasury has pledged to unlock climate finance alongside increasing domestic resource mobilisation and maximisation of the tax instruments to widen the tax base and tax revenues.
“We already have no much headroom in the fiscal space so we will work with colleagues to see how to manage the further escalation of debt,” said Muhati.