The Central Bank of Kenya (CBK) has reported a sharp increase in the country’s foreign exchange reserves, reversing a three-week decline and strengthening Kenya’s ability to pay for imports and support the shilling.
Latest CBK data shows that the reserves rose by $371 million, or about Ksh 48.1 billion, to $15.253 billion (Ksh 1.98 trillion) as of September 10. This was an increase from Ksh1.93 trillion recorded on September 3.
The growth also pushed Kenya’s import cover to 6.3 months from 6.1 months in the previous week. Import cover refers to the period a country can continue paying for imports using its available foreign exchange reserves.
“The foreign exchange reserves remained adequate at USD 15,253 million (6.3 months of import cover) as of September 10. This meets CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover,” CBK said.
The latest increase marked a turnaround after the reserves had been falling since mid-August. Kenya’s reserves stood at $15.245 billion on August 13 before dropping to $15.155 billion on August 20.
They declined further to $14.934 billion on August 27 and reached $14.882 billion by September 3 before recovering last week.
The improved reserves position comes as the Kenyan shilling continues to trade with little movement against the US dollar. The local currency exchanged at Sh129.45 against the dollar on September 10, compared with Sh129.48 recorded a week earlier.
CBK said the shilling also remained stable against other major international and regional currencies during the week.
A rise in foreign exchange reserves provides Kenya with a bigger financial buffer to meet external obligations and pay for imports. It can also offer support to the local currency during periods of increased demand for dollars.
However, Kenya could face renewed pressure if international oil prices remain high. CBK data showed that the price of Murban crude oil increased to $95.41 per barrel on September 10 from $86.01 a week earlier.
The rise followed concerns over possible oil supply disruptions linked to developments in the Middle East. Higher crude oil prices could increase Kenya’s import bill because the country depends heavily on imported petroleum products.
The increase in reserves was recorded alongside mixed activity in the domestic financial market. Commercial banks remained liquid, holding an average of Ksh 21.3 billion in excess reserves above the required cash reserve ratio of 3.25 per cent.
Meanwhile, the Kenya shilling overnight interbank average remained unchanged at 8.75 per cent during the week.
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