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Forex reserves hit record Sh1.9trn on Eurobond haul
The reserve accumulation comes after Kenya raised $2.25 billion through a new Eurobond transaction that attracted strong investor demand across two tranches with maturities of seven and 12 years.
Kenya’s foreign exchange reserves rose to a new record to stand at $14.6 billion (Sh1.9 trillion) as of Thursday last week up from $12.5 billion (Sh1.6 trillion) on February 26, boosted by proceeds from a recent Eurobond sale that has significantly strengthened the country’s external liquidity position.
The $2.1 billion week-long expansion reflected a sharp inflow of foreign cash following the government’s $2.25 billion (Sh290.3 billion) sovereign bond issuance late last month.
The latest rise pushes the forex stock above the previous peak of $12.7 billion (Sh1.6 trillion) recorded mid last month, signaling a further build-up of the country’s foreign currency buffers amid increased reliance on global capital markets for budget financing and debt management.
At the current level, the reserves stand at an equivalent of 6.2 months of import cover, surpassing the statutory requirements of the CBK and the East African Community of maintaining at least four and 4.5 months of import cover, respectively.
Foreign exchange reserves represent liquid assets held by a country’s central bank and serve as a buffer against external economic shocks.
They are primarily used to ensure that the country can meet its international payment obligations, including paying for imports and servicing external debt.
The reserves also provide the central bank with the capacity to intervene in currency markets to stabilise the exchange rate when necessary.
A higher reserve level is widely viewed as a sign of improved external liquidity and stronger ability to absorb volatility in global financial markets.
The reserve accumulation comes after Kenya raised $2.25 billion through a new Eurobond transaction that attracted strong investor demand across two tranches with maturities of seven and 12 years.
“The rise in our official reserves is due to the issuance of the Eurobond late last month,” Treasury's director-general of accounting services, Bernard Ndung'u, told the Business Daily in a text response.
The shorter tranche raised $900 million (Sh116.3 billion) and will pay investors annual interest at 7.875 percent, while the longer 12-year paper attracted $1.35 billion (Sh174.5 billion) at a coupon rate of 8.7 percent.
Market data showed the offering was heavily oversubscribed, with investors placing bids far above the amount offered by the government during the sale.
The seven-year bond attracted orders worth $1.8 billion (Sh232.2 billion), significantly exceeding the offered amount, while the 12-year paper received bids worth $2.8 billion (Sh361.3 billion).
The proceeds from the bond sale are partly being used to refinance existing external debt obligations while the remainder will support the government’s broader fiscal financing needs.
A portion of the funds was earmarked for a $500 million (Sh64.6 billion) buyback of two outstanding Eurobonds as the government sought to retire part of its existing debt ahead of maturity.
Treasury estimates had indicated that roughly $1.75 billion (Sh225.8 billion) would remain as surplus after completing the buyback exercise thus the boost of the forex reserves held at the CBK.
Kenya’s reserve build-up has coincided with heightened use of international bond markets to refinance maturing obligations and manage public debt.
The government has turned to Eurobond markets several times in the past two years as part of its broader liability management strategy.
These transactions have included bond switch operations and partial buybacks aimed at extending the maturity profile of Kenya’s external debt.
The approach has been intended to ease pressure on the country’s reserves that had previously been strained by heavy external debt repayments.
