Kenya’s foreign exchange (Forex) reserves have declined $8.2 billion from the peaks as the central bank fight to reduce the decline of the currency.
October 26, 2020 | AtoZ Markets – Kenya’s Forex reserves have plummeted by 66.4 billion shillings (about $615 million) in a month as the Central Bank fights to stabilize declining currency amid the rise in imports.
The reserves plunged from 8.834 billion dollars on Sept. 17 to 8.22 billion dollars on Oct. 22, the apex bank revealed in its weekly report of the financial markets on Saturday.
Kenyan shilling at all-time low as Forex reserves plummet
The Kenyan shilling has declined considerably in the past months, hitting an all-time low of 108.8 on Friday against the U.S. dollar.
During the period, the apex bank has used its dollar reserves to bolster the currency to prevent it from falling to levels that destabilize the financial markets.
Kenya’s imports are also rising as business surges after the Covid-19 lockdown.
Because Kenya is a net importer of goods that include fuel and industrial raw materials, a weaker shilling means imports become more expensive.
The surge in imports amid low exports means the central bank has to use more of its dollar reserves to cover for the imports. Despite the decline in foreign exchange reserves, however, the Central Bank notes that they are adequate to cover for imports.
“The usable foreign exchange reserves remained adequate at 8.223 million dollars, an equivalent of 4.99 months of import cover. This meets the bank’s statutory requirement to endeavor to maintain at least four months of import cover,” said the apex bank.
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