Foreign exchange reserves increase by Sh89 billion in 2019

The Central Bank of Kenya added Sh89 billion ($879 million) worth of official foreign exchange reserves to its portfolio between the beginning of the year and just before Christmas.

This brought the total forex reserves as at December 24, 2019, to Sh896.3 billion ($8.848 billion).

“The CBK usable foreign exchange reserves remained adequate at $8,848 million (5.44 months of import cover) as at December 24. This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover, and the EAC (East African Community) region’s convergence criteria of 4.5 months of import cover,” said the CBK.

Despite the official reserves closing the year higher than at the beginning, it had been at times much higher than its current level, especially in March when they rose above Sh1 trillion ($10 billion) following the injection of dollars from the $2.1 billion Eurobond sale.

The current level of reserves shows the CBK has significant financial muscle to stabilise the local currency in the event of destabilising forces such as a jump in import demand, speculative attacks and a change in global investor sentiment that might see outflow into advanced markets as has been witnessed in some cases in the past.

At present there has been constrained import demand at a time when the official reserves have been high, raising the value of the Kenya shilling.

As of December 31, the shilling was trading at an average of 101.34 units to the greenback — slightly weaker than the previous day’s level of 101.16 units and December 27 value of 100.77 units, but still stronger compared to the 2019 opening value of 101.85.