Kenya’s foreign exchange reserves rose by $371 million (Sh48.1 billion) last week, reversing a three-week decline.
The latest increase pushed the reserves to $15.3 billion (Sh1.98 trillion) as of September 10, up from $14.9 billion (Sh1.93 trillion) recorded a week earlier, strengthening the country’s external buffer and lifting the import cover from 6.1 months to 6.3 months.
According to the Central Bank of Kenya’s latest data, the 2.5 per cent increase marks a recovery after reserves had declined steadily through August and early September.
The latest build-up therefore reversed the decline recorded over the preceding three weeks, returning the reserves to levels close to those seen in mid-August.
The reserves stood at $15.245 billion (Sh1.976 trillion) on August 13 before falling to $15.155 billion (Sh1.964 trillion) on August 20, $14.934 billion (Sh1.936 trillion) on August 27 and $14.882 billion (Sh1.929 trillion) on September 3.
The improvement also strengthened Kenya’s capacity to finance imports. Import cover increased to 6.3 months from 6.1 months, based on a 36-month average of imports of goods and non-factor services.
“The foreign exchange reserves remained adequate at $15,253 million (6.3 months of import cover) as of September 10. This meets CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover,” CBK noted.
The stronger reserves position comes against a backdrop of relative stability in the foreign exchange market.
The shilling traded at Sh129.45 to the US dollar on September 10, compared with Sh129.48 on September 3.
CBK said the currency remained stable against major international and regional currencies during the week.
The improved external buffer provides additional support for the stability of the shilling by giving the central bank greater capacity to manage temporary foreign exchange pressures and meet the country’s external obligations.
However, developments in global commodity markets could create pressure on the reserves going forward.
CBK reported that Murban crude oil prices rose sharply to $95.41 a barrel on September 10 from $86.01 on September 3, following renewed concerns over oil supply disruptions linked to developments in the Middle East.
Higher oil prices can increase Kenya’s import bill because the country relies heavily on imported petroleum products, potentially increasing demand for dollars and putting pressure on the foreign exchange position if the trend persists.
The reserves increase was also recorded as Kenya’s domestic financial markets showed mixed movements.
The money market remained liquid, with commercial banks holding an average of Sh21.3 billion in excess reserves above the 3.25 per cent cash reserve requirement during the week.
The Kenya shilling overnight interbank average remained at 8.75 per cent.
