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Forex reserves hit record Sh1.6trn on surplus Eurobond cash
Current official reserves are equivalent to 5.3 months of import cover, surpassing the statutory requirements of the CBK and the East African Community of maintaining at least 4 and 4.5 months of import cover, respectively.
Official foreign reserves held at the Central Bank of Kenya (CBK) hit a new high of $12.1 billion (Sh1.6 trillion) last week, on excess cash from a $1.5 billion (Sh193.7billion) Eurobond sale earlier this month.
Last week’s reserves at the CBK surpassed the previous record of $11.2 billion (Sh1.4 trillion) set in July this year, reflecting an improvement in the availability of foreign currency after months of increased inflows from debt financing and exports.
CBK data show the build-up coincided with the government’s Sh193.7 billion Eurobond sale earlier this month, whose proceeds were partly used to refinance another $1 billion (Sh129.2 billion) Eurobond maturing in February 2028.
Treasury's director-general of accounting services, Bernard Ndung'u, told the Business Daily that the State paid $657.8 million (Sh85 billion) in the buyback, with the balance contributing to the enhanced reserves at the CBK.
“In the recent Eurobond of $1.5 billion, we paid (buyback) $657.8 million. The balance accounts for the increase (in forex reserves),” said Mr Ndung’u.
The Treasury launched a concurrent buyback of the 2018 Eurobond at a premium of 3.75 percent, enabling holders to exchange their notes for the new seven- and 12-year securities that will mature in 2033 and 2038, respectively.
The new Eurobond, which attracted strong investor demand, forms part of the government’s broader debt management plan to smooth out maturities and reduce refinancing risks in the medium term.
Reserves have also benefited from disbursements by multilateral lenders, increased foreign direct investment inflows, alongside steady diaspora remittances that hit $3.774 billion (Sh488.5 billion) in the nine months to September.
5.3 months cover
A stable shilling has further bolstered the reserve position, with the local currency trading at an average of Sh129 to the dollar in mid-October compared to lows of Sh161 in February 2024.
Higher exports of tea, coffee and horticultural products have increased foreign-exchange earnings, helping to offset rising import bills for petroleum and industrial goods and cushioning the current account.
Current official reserves are equivalent to 5.3 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 are held at the CBK as national assets and are used as a safety net to ensure the availability of foreign exchange to meet Kenya’s external obligations, including paying for imports and external debt service.
The reserves are also used to intervene when deemed necessary to smooth ‘erratic’ movements of the exchange rates and the CBK's external payments.
Kenya’s improved reserve levels come after two years of gradual depletion triggered by elevated external-debt repayments, high import costs, and a tight global financing environment.
The rebound underscores the impact of proactive refinancing measures, including Eurobond buybacks and switch bonds, which have helped restore confidence in Kenya’s ability to manage upcoming debt maturities.
In March 2025, the Treasury conducted a partial buyback of $579 million (Sh74.8 billion) on a seven-year $900 million (Sh116.2 billion) Eurobond issued in 2019, replacing it with an 11-year, $1.5 billion paper priced at 9.5 percent.
A year earlier, in February 2024, Kenya had redeemed $1.5 billion of the 2014 Eurobond ahead of maturity to ease repayment pressure and calm investor concerns over liquidity at the time.
The successive refinancing has helped steady market sentiment and boost foreign-investor appetite for Kenyan debt instruments in global markets.
