The Central Bank of Kenya (CBK) projects its usable foreign currency reserves to rise by Sh187.4 billion ($1.45 billion) this year, boosted by inflows from the International Monetary Fund (IMF), enhancing the country’s resilience to economic shocks.
The CBK holds foreign exchange reserves as a safeguard ensuring the availability of foreign currency to meet the country’s external obligations including imports and external debt service.
CBK says its official reserves already stand at their highest level on record in nominal terms having closed 2024 at Sh2.1 trillion ($9.3 billion).
The IMF is expected to disburse its last instalment of financing from a multi-year programme with Kenya by June 2025, providing additional foreign exchange to fund the reserves.
“The surplus (from the balance of payments) together with the expected IMF disbursements is projected to result in a buildup of gross reserves by Sh187.4 billion ($1.45 billion),” CBK Governor Kamau Thugge said on Thursday.
Other capital and financial inflows including remittances are expected to offset the current account deficit, estimated at Sh720.8 billion ($5.58 billion) or 3.8 percent of GDP in 2025.
CBK usable reserves stood at Sh1.17 trillion ($9.06 billion) as of February 4, representing 4.63 months of import cover.
This met both the statutory requirement to maintain at least four months of import cover and 4.5 months under the East Africa Community (EAC) convergence criteria.
“The usable reserves of the CBK stand at the highest level in nominal terms and we were only previously close in 2019 and 2021 after the issuance of some Eurobonds. The level of reserves in 2024 was based on the good performance in the current account. The reserve position continues to be strong, adequate, and sufficient to cover short-term external shocks,” Dr. Thugge added.
CBK’s official reserves could receive a further boost from additional debt inflows including a second tranche from the ongoing World Bank Development Policy Financing (DPF) facility and a Sh193.7 billion ($1.5 billion) commercial loan from the United Arab Emirates (UAE).
Both facilities are under consideration in the current fiscal year running to June 30, 2025, and would help reduce the exchequer’s overreliance on the domestic debt market to plug the budget deficit.
The official reserves are however expected to come under periodic pressure from scheduled external debt payments in the year with the government routinely tapping the buffer to meet outstanding payments.
Kenya for instance makes bi-annual payments to China to foot its debt from the Standard Gauge Railway (SGR) project.
The country is further expected to begin the amortisation of a Sh116.2 billion ($900 million) Eurobond which matures in May 2027.
The redemption of the bond is split equally in three parts, meaning the exchequer is set to pay Sh38.7 billion ($300 million) as the first tranche in May 2025.
Kenya’s official reserves came under significant pressure in 2023 as the CBK deployed the treasure trove to counter exchange rate weakness as investors doubted the ability of Kenya to make a Sh258.3 billion ($2 billion) bullet payment on its debut Eurobond in June last year.
The National Treasury beat the concerns by buying back Sh193.7 billion ($1.5 billion) notes from investors through the issuance of a new Eurobond in February last year, repelling jitters and rebasing the foreign reserves for growth.
The reserves had closed in 2023 at a decade-low of Sh850 billion ($6.58 billion).
