Kenya’s Foreign Exchange Reserves (Forex Reserves) plummeted to a 9-month low as the shilling continues to weaken against the US Dollar, according to data from the Central Bank of Kenya (CBK).
The data shows the reserves stood at Ksh.869.5 billion as of February 9.
This is compared to June last year when the Forex Reserves almost neared Ksh.1 trillion mark to hit Ksh.955 billion.
Economists have argued that the Dollar shortage is being occasioned by pent-up demand for the dollar which has led to the depreciation of the Kenyan shilling, currently at Ksh.125.4.
Despite the slump in reserves, the CBK remained optimistic that it still meets statutory endeavour to maintain at least 4 months of import cover.
“This meets the CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover,” said CBK.
It, however, falls short of the East Africa Community (EAC) region’s convergence criteria of 4.5 months of import cover.
Forex Reserves are used by Central Banks to meet their international financial obligations such as paying foreign debts, influencing monetary policy and supporting the importation of critical goods.
The country has since turned to the International Monetary Fund (IMF) and the World Bank for debt inflows to anchor the dwindling reserves.
This includes Ksh.93.9 billion from WB which the National Treasury expects in its coffers starting June this year and a continued disbursement of IMF’s 38-month Ksh.293.1 billion programme.
Diaspora remittance on the other hand sustained stronger grounds at Ksh.43.7 billion as of January 2023 with total cumulative inflows for the 12 months to January 2023 totaling Ksh.505.9 billion.
The remittance inflows hold a key purpose in supporting the current account and the foreign exchange market.