A fresh strain is emerging on Kenya’s external finances, with new data showing a drop in the country’s foreign exchange reserves as global economic pressures intensify.
Figures released by the Central Bank of Kenya (CBK) indicate that reserves fell by $340 million (Ksh 43.9 billion) in the week ending April 9. This pushed the total reserves down to $13.316 billion (Ksh 1.72 trillion), compared to $13.656 billion recorded the previous week.
The decline means Kenya now holds reserves equivalent to 5.7 months of import cover, slightly lower than before, but still comfortably above the statutory minimum threshold.
“Despite the decline, reserves remain above the statutory minimum of four months of import cover, providing a buffer against external shocks,” CBK said.
The pressure is largely coming from outside the country. Rising global oil prices, driven by ongoing tensions in the Middle East, have made imports more expensive. For a country like Kenya, which relies heavily on imported fuel, this quickly translates into higher demand for dollars and a drawdown on reserves.
Shipping disruptions and uncertainty around key global routes such as the Strait of Hormuz have also contributed to the situation. These developments have kept energy prices elevated, increasing the cost burden for many import-dependent economies.
At the same time, the central bank has opted for caution on interest rates. It recently left the benchmark lending rate unchanged at 8.75 per cent, signalling a wait-and-see approach as it tracks inflation risks linked to fuel and basic commodities.
“CBK recently held the benchmark lending rate at 8.75 per cent, maintaining a cautious stance as it monitors inflation risks tied to rising fuel prices,” the bank noted.
Even with the drop in reserves, the Kenyan shilling has shown resilience. It traded at around Sh129.53 against the US dollar during the period, supported by CBK’s market interventions and the still-adequate reserve levels.
The domestic money market also remained stable. Banks continued to hold surplus liquidity, keeping interbank lending rates steady and ensuring there was enough cash circulating within the financial system.
Meanwhile, the government securities market continued to attract strong interest. The latest Treasury bill auction was slightly oversubscribed, a sign that investors are still willing to lend to the government despite global uncertainties.
CBK maintained that its current policy direction is still suitable under the circumstances.
“CBK said the current monetary policy stance remains appropriate to anchor inflation expectations and support exchange rate stability in the near term,” it stated.
The coming weeks will be critical. If oil prices remain high and global tensions persist, Kenya could continue to feel pressure on its reserves. However, inflows from exports, tourism recovery, and diaspora remittances may help ease some of the strain.
For now, the country remains in a relatively stable position, but the external environment is becoming increasingly unpredictable.
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