Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
CBK under pressure to hold more dollars on rising imports
CBK’s usable foreign reserves have stood firm against pressure from rising imports backed largely by inflows from diaspora remittances and US dollar denominated debt.
The Central Bank of Kenya (CBK) must hold at least Sh1.17 trillion ($9.1 billion) in hard currency reserves to meet its requirement of keeping at least four months of the country’s import requirement as orders for goods from abroad rise.
This represents a 16 percent rise from Sh1 trillion ($7.8 billion) at the start of the year, which signals Kenya’s rising import needs.
CBK is required to keep hard currency reserves equivalent to at least four months of the country’s import requirement to meet short term shocks including unavailability of US dollars from the market.
The apex bank calculates in foreign exchange reserves based on the 36 months average of imports of goods and non-factor services.
CBK’s foreign exchange reserves stood at Sh1.59 trillion ($12.2 billion) as of November 13, 2025, representing about 5.4 months of imports into the country.
The reserves must be kept at about Sh1.17 trillion ($9.1 billion) using the same import demand estimate if CBK is to maintain its import cover requirement at a minimum of four months.
Three years ago, CBK would have required less than Sh1 trillion in reserves to cover at least four months of the country’s imports with the threshold sitting at Sh925.7 billion ($7.148 billion) as at the start of January 2023.
Kenyan import demands have continued to rise, driven mostly in recent months by orders for machinery and transport equipment.
“Good imports increased by 9.2 percent in the 12 months to August 2025 mainly due to an increase in intermediate and capital imports, particularly machinery and transport equipment,” CBK said last month.
“Goods imports were 9.1 percent higher in the first eight months of 2025, mainly due to an increase in intermediate and capital goods imports.”
Total goods imported between January and August 2025 stood at Sh2.06 trillion ($15.94 billion) from Sh1.89 trillion ($14.61 billion) in the same period last year.
CBK’s usable foreign reserves have stood firm against pressure from rising imports backed largely by inflows from diaspora remittances and US dollar denominated debt.
According to the Ministry of Foreign Affairs and Diaspora Affairs, remittances crossed the Sh1 trillion mark for 2025 this month underpinned by the government’s engagement with the community abroad.
“Diaspora remittances remain a vital pillar of our economy, providing financial support to households which directly contribute to national development. These resources are essential in complementing our economic strategies and advancing Kenya’s growth agenda,” Foreign Affairs Cabinet Secretary Musalia Mudavadi said.
The ministry stated that over 430,000 Kenyans have gained employment abroad through bilateral labour agreements (BLAs) since 2023.
Kenya’s access to the international capital markets has complemented inflows from diaspora remittances to keep the hard currency buffer in an adequate position.
The country undertook a buyback of Sh129.5 billion ($1 billion) Eurobond notes due in February 2028 by issuing a new Sh194.2 billion ($1.5 billion) Eurobond which replenished the CBK reserves.
CBK struggled to meet its foreign currency requirements in 2023 as Kenya faced a dollar availability crisis (dollar crunch) which was driven mostly by speculation on a likely default arising from the maturity of Sh129.5 billion ($1 billion) Eurobond notes in June 2024.
The jitters dissipated in February last year as Kenya undertook an early buyback of the notes which not only ended the fears but also topped up the CBK dollar reserves.
Foreign exchange reserves held at CBK are national assets safeguarded to ensure availability of hard currency to meet the country’s external obligations including imports and external debt service.
The size of official reserves serves as a confidence signal to potential investors and ratings agencies.
CBK undertakes the management of reserves with the policy covering safety, liquidity and maximisation of total returns but the primary objective is usually capital preservation.
