Kenya’s foreign exchange reserves have risen above the statutory requirements as the government turned to IMF loans to the exchequer for budgetary support.
The country's FX reserves have been dropping in the past months, breaching both national and East African thresholds of 4 and 4.5 months of import cover.
Data from the Central Bank of Kenya (CBK) show that official foreign exchange reserves have risen back above the prescribed lower limit of an equivalent of four months of import cover.
“The usable foreign exchange reserves remained adequate at $ 7,439 million (4.17 months of import cover) as of December 29. This meets the CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover,” CBK said in its weekly bulletin
Kenya’s foreign exchange reserves rose to $7.537 billion (Sh928.6 billion shillings) after the International Monetary Fund (IMF) disbursed Sh81.7 billion shillings
The funds will support the country’s external position, which has been impacted by lower inflows of foreign financing.
The dropping FX reserves expose the country to difficulties in making international payments, including imports and debt repayment and hedging against exchange rate risks.
New data from the CBK shows the largely dollar-denominated cover rose by $462 million (Sh56.9 billion) to an equivalent 4.22 months import cover.
The reserves now stand at $7.537 billion (Sh928.6 billion) from $7.075 billion (Sh871.6 billion) previously.
CBK statutory requirements require the reserve bank to endeavor to keep foreign currency reserves equivalent to at least four months of the country’s import demand.
However, the growing forex reserves did little to aid the weakening shilling.
The shilling opened at its lowest level in history to trade 123.60 units against the greenback on Wednesday morning before stabilising to 123.40 by the time of going to press.
The local currency has shed almost 10 per cent against the US dollar and pundits have it that it could hit a low of 125 by end of this month on the tough monetary stance that has seen central banks hike base lending rates.
