Forex reserves up Sh33bn after IMF loan injection


Central Bank of Kenya. FILE PHOTO | NMG

Kenya’s forex reserves held at the Central Bank of Kenya have increased by Sh33.4 billion ($313 million) since the beginning of this month following the disbursement of the first tranche of an International Monetary Fund (IMF) loan facility to the government.

Central Bank of Kenya (CBK) data shows the reserves stood at $7.656 billion (Sh817.7 billion) on April 15, up from $7.343 billion (Sh784.2 billion) on April 1.

The apex bank said in its weekly bulletin that the reserves represent 4.71 months of import cover, the highest since January 28. In the past two months, the forex cover has been hovering just above the EAC region’s convergence criteria of 4.5 months.

The IMF disbursed the first tranche of $314 million (Sh34.45 billion) , which is part of the $2.4 billion (Sh256.3 billion) three-year financing programme that was agreed in February.

The Treasury normally sells the hard currency proceeds of external loans to the CBK in exchange for shillings, which can then be deployed to the intended budgetary programmes locally.

Kenya also plans to borrow an additional $1.5 billion (Sh160.2 billion) from the World Bank this year.

“There will be significant concessional flows that will support of the government and indeed of the (foreign exchange) reserves in the next few months before the end of this fiscal year,” said CBK governor Patrick Njoroge last month during a briefing following the Monetary Policy Committee meeting.

The country also gets foreign currency inflows from export and tourism receipts and diaspora remittances, some of which find their way into the official reserves through CBK’s participation in the money markets.

The forex flows have been under strain in recent months due to falling inflows from tourism and international travel due to Covid-19 restrictions, amid rising debt service obligations.

The higher foreign reserves following the IMF loan boost are now expected to support the shilling that has last week strengthened to 106.8 against the dollar—by giving the market confidence that the CBK has enough firepower to deploy in case of exchange rate volatility.