- Reserves held by Central Bank of Kenya are at $7.19 billion
- Holdings are sufficient to pay for 4.03 months of imports
According to media reports and Bloomberg’s article published on November 21, 2022, the number of months Kenya can finance imports with its foreign-exchange reserves fell to a seven-year low, almost breaching a required buffer, according to central bank data.
Reserves held by the Central Bank of Kenya stood at $7.19 billion in the week ending Nov. 17, sufficient to pay for 4.03 months of imports, the central bank said in a report. That’s less than a day more than the minimum four months it’s required to maintain to cushion the financial system against short-term shocks.
The reserves have been depleting because of repayments to bilateral and commercial lenders and central bank interventions to try slow the shilling’s depreciation, FirstRand Group Ltd.’s Rand Merchant Bank economist Daniel Kavishe said in a research note. The currency has weakened almost 8% against the dollar this year.
Other factors eating into the holdings include a jump in import costs due to a strong dollar and surging commodity prices fanned by Russia’s invasion of Ukraine, Renaldo D’Souza, head of research at Nairobi-based Sterling Capital Ltd., said by email. Lower export earnings after poor farm harvests and a decline in remittances from Kenyans living abroad because of economic difficulties are also playing a role, he said.
D’Souza expects the central bank’s monetary policy committee to raise interest rates at its next meeting on Nov. 23 to help attract foreign capital and stem the decline in reserves. The median estimate of seven economists in a Bloomberg survey is for the key rate to be raised by 50 basis points to 8.75%.
