CBK sees shilling rebounding after Eurobond sale

Kenya’s central bank (CBK) said the sale of the East African country’s first Eurobond will boost foreign exchange reserves, helping to reverse the shilling’s slide to a 2 1/2-year low after attacks in the nation’s biggest cities.

The shilling has weakened 1.9 percent this year. It dropped 0.3 percent to 87.95 per dollar as of 11:26 a.m. in Nairobi, heading for its worst closing level since Dec. 2011.

Kenya may debut international debt as early as this week, Treasury Secretary Henry Rotich said last week. The $1.5 billion sale has been repeatedly delayed because of organizational and legal challenges.

“Proceeds from the debut Eurobond will significantly raise the level of foreign reserves with the exchange rate expected to appreciate," CBK said Monday in an e- mailed statement.

“The increased pressure on the Kenya shilling is attributed to seasonal factors as corporations pay out dividends to external shareholders.”

Kenya’s foreign-exchange reserves dropped each week since May 8 to the equivalent of 4.4 months of import cover.

Nairobi was rocked by two attacks this month in which at least 15 people died, while four people were killed in two explosions in the port city of Mombasa.

Tourist arrivals fell by almost a fifth last year as the country was hit by a series of bombings, including an assault by the Somali militant group al-Shabaab on the Westgate mall in Nairobi that killed at least 67 people.

Tourism is Kenya’s second-biggest source of foreign currency.

The shilling will remain below 88 per dollar as long as there is no increase in militant attacks, said Aly-Khan Satchu, chief executive officer of Rich Management Ltd. in Nairobi.

“People are looking forward to an inflow of dollars” from the Eurobond sale, he said.