Kenya’s forex reserves hit five-month high on dollar inflows

Kenya’s foreign currency reserves have climbed to a five-month high on dollar inflows from government external borrowing, the Central Bank of Kenya has said.

The country’s official reserves are now worth Sh798 billion, equivalent to 5.1 months of import cover and well above the preferred four months.

In the past one week, the reserves have gone up by $804 million (Sh82.6 billion).

This indicates that the Treasury has drawn down foreign loans, which could either be the $800 million syndicated loan from four international banks or a $500 million facility from the African Export-Import Bank (Afreximbank).

The CBK has also not been called upon to spend dollars in currency support in the past two months, with the shilling appreciating by 1.3 per cent to the dollar since the end of January to exchange at a mean of 102.70 Tuesday.

“The CBK’s foreign exchange reserves currently stand at $7.76 billion (5.1 months of import cover) compared to $6.96 billion (4.6 months of import cover) at the end of January 2017,” said CBK governor Patrick Njoroge in a statement following Monday’s Monetary Policy Committee meeting.

“The increase is largely due to inflows of planned external loans of the government. These reserves, together with the precautionary arrangements with the International Monetary Fund (IMF), equivalent to $1.5 billion, continue to provide an adequate buffer against short-term shocks.”

Treasury CS Henry Rotich has announced that the government plans to borrow a total of $1.46 billion (Sh150 billion) through syndicated loans to plug a budget deficit in the current fiscal year ending in June.

The foreign exchange market has stabilised due to lower imports of petroleum products, machinery and transport equipment coupled with good inflows from horticulture, tourism, and diaspora remittances — thus narrowing the current account deficit.

Latest CBK data shows that diaspora inflows in the one year to February stood at $1.73 billion (Sh177.7 billion) compared to $1.58 billion (Sh162.3 billion) in the 12 months to February 2016.

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