NAIROBI: Foreign exchange reserves at the Central Bank have fallen below the recommended minimum of four months of import cover. The latest Central Bank Weekly Bulletin indicates that forex reserves are at 6.195 billion dollars which is equivalent to 3.98 months of import cover.
This is both below the recommended minimum in Kenya of four months of import cover and the East African Community’s level of at least four and a half months of import cover. The shilling has been under pressure from a resurgent US economy that has seen the dollar strengthen against most currencies.
This has seen the Central Bank sale dollars as well as mop up excess liquidity to support the shilling. However, sale of dollars has been depleting the foreign exchange reserves at the Central Bank. The latest Central Bank weekly bulletin indicates that the forex reserves at Central Bank of Kenya are at 6.195 billion dollars which is equivalent to 3.98 months of import cover.
This is below the recommended minimum of four months of import cover in Kenya and way below the East African Community level of at least four and a half months of import cover. The central bank’s weekly bulletin indicates that the forex have been below the recommended minimum for two weeks now.
This is despite the government insisting that there were enough dollars to offer the country adequate import cover. The country uses the dollar reserves at the Central Bank of Kenya to pay interest on foreign debt as well as sale the greenbacks to support the shilling when it weakens.
This comes as the Monetary Policy Committee prepares to hold their monthly meeting on Tuesday. The shilling has been under pressure in recent weeks forcing the Central Bank to sell dollars as well as mop up excess liquidity.
The shilling marginally weakened against the dollar, under pressure from increased demand for greenbacks by energy and telecommunications companies. In mid-morning trade, the shilling was quoted at 105.40 to the dollar, which is weaker than Friday’s closing level of 105.10.
