CBK working with Treasury to minimise volatility, has ample reserves

Tuesday, September 29, 2015 — updated on December 25, 2020 - 2 min read

Central Bank of Kenya Governor Patrick Njoroge (left) and Treasury Cabinet Secretary Henry Rotich on September 25, 2015. Kenyan commercial banks have steeply increased the cost of loans, leaving their customers with a massive debt servicing burden. PHOTO | SALATON NJAU |

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The governor said there had to be a strengthening of Kenya's fiscal position and he was working with the Treasury on this issue although he did not give details.

Kenya's central bank governor said on Tuesday the bank was working with Treasury to strengthen the country's fiscal position, in a financial year when the budget deficit is forecast to rise to 8.7 per cent of gross domestic product.

Patrick Njoroge also said the bank was working to minimise volatility in the exchange rate and had enough foreign currency reserves, which have dipped below four months of import cover, the level it usually seeks to maintain.

"We have ample reserves in case of any foreseeable shocks," the governor told his first news conference since taking office in late June, adding that a $688 million stand-by facility with the International Monetary Fund provided an additional cushion.

The central bank's weekly bulletin, published on September 25, put foreign reserves at $6.180 billion, equivalent to 3.93 months import cover. It fell from $6.195 billion the previous week and $6.658 billion at the start of July.

READ: CBK forex reserves steady in August after months of decline

The governor said there had to be a strengthening of Kenya's fiscal position and he was working with the Treasury on this issue although he did not give details. In July, he had said "fiscal prudence" was needed to restore macro stability.

Kenya's budget deficit has climbed from a forecast 7.8 per cent of GDP in fiscal 2014/15. The financial year starts on July 1.

The shilling has weakened about 16.5 per cent against the dollar this year, but Njoroge said the central bank did not have a target for shilling exchange rate and was committed to a flexible exchange rate.

Kenyan government debt yields have also been rising in recent weeks. Njoroge said the increase in short-term debt was in line with the bank's tighter monetary policy.

The central bank has raised its rates by 300 basis points since June to 11.50 per cent.