Central Bank of Kenya (CBK) usable foreign exchange reserves dropped Sh35.87 billion in the week to March 26, to over two-year lows.
CBK data show the reserves now stand at Sh836.33 billion ($7,965 million) down from Sh872.20 billion ($8,298 million) recorded in the week ending March 19, marking the lowest point since the week ending March 8, 2018 of $7155 million or 4.78 months of import cover.
This represents the sharpest drop compared to a fall of Sh12.6 billion a week earlier. It is an Sh83.26 billion drop from Sh919.59 billion ($8758 million) of reserves representing 5.39 months of import cover recorded in the first week of the year.
“The CBK usable foreign exchange reserves remained adequate at USD7,965 million (4.84 months of import cover) as at March 26. This meets the CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover,” CBK stated.
The decline comes on reduced inflows of export earnings due a freeze on imports of fruits and vegetables to China, reduced orders for flowers from consumers in Europe and the Middle East.
This has been coupled with reduction in airfreight and shipping volumes due to closure of borders to fight spread of the coronavirus.
Fears over global recession has also led to low bond uptakes and travel receipts from major tourist-source economies such as Italy is hit hardest by the virus. Foreign currency reserves are used to support the currency against the dollar, pay external debt and provide confidence for investors.
The reduced foreign income has seen the shilling come under pressure to exchange at 106.20 during the week.
“The Kenya shilling eased against major international currencies in the early part of the week ending March 26 but recorded gains towards the end of the week,” it added.
“The initial pressure on the shilling was due to a strengthening of the US dollar against most currencies and low supply. It exchanged at 106.20 on March 26 compared to 104.22 on March 19.”