This archive report was first published on 30 September 2019.
Kenya's official foreign exchange reserves have been on a downward trend since July, with the latest dip to a four-month low in the week ending September 26.
According to data from the Central Bank of Kenya (CBK), the reserves stood at $8.985 billion or Sh931.7 billion, the lowest level since May 23 when they stood at $7.981 billion.
The decline in reserves is attributed to the CBK's efforts to stabilize the local currency, which has been under pressure in recent months. The CBK has been mopping up tens of billions of shillings from the market through term auction deposits.
Despite the recent fall in reserves, the CBK and some analysts maintain that the forex levels are enough to provide adequate cover for import costs. The CBK's usable foreign exchange reserves remained adequate at $8,985 million (5.61 months of import cover) as at September 26, meeting the statutory requirement to maintain at least four months of import cover.
Investment firm Cytonn echoed the CBK's sentiments, saying that high levels of forex reserves continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.
It is worth noting that the CBK uses its foreign exchange reserves to buy local currency from the market or sell forex to banks, but does not disclose when it makes such transactions. The CBK also spends forex in repaying foreign debt, which stood at Sh3.02 trillion or 52 percent of total public debt as at the end of June this year.
