Capital Markets

Forex reserves fall on Eurobond payments

Patrick Njoroge
Central Bank of Kenya Governor Patrick Njoroge. PHOTO | FILE PHOTO | NMG 

Central Bank of Kenya (CBK) foreign exchange reserves fell Sh10 billion ($99 million) last week, at a time the Treasury was due to pay interest to lenders of the $2 billion (Sh200 billion) Eurobond Kenya issued in February 2018.

CBK data shows the reserves stood at $8.409 billion (Sh849.3 billion) on February 27, down from $8.508 billion (Sh589.3 billion) a week earlier.

In the previous week, the reserves had gone up by $12 million (Sh1.2 billion).

The regulator does not normally disclose the finer details of its use of the reserves, but in the absence of pressure on the exchange rate, all indications pointed to the payment of Eurobond interest that fell due last week.

“The CBK usable foreign exchange reserves remained adequate at $8.409 billion (5.11 months of import cover) as at February 27. This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover,” said CBK in its weekly bulletin.


The Eurobond was issued on February 28, 2018 in two equal $1 billion tranches of 10-year at a coupon of 7.25 percent and 30-year at a coupon of 8.25 percent, with interest payable semi-annually on February 28 and August 28.

On an annual basis, Kenyan taxpayers fork out Sh7.32 billion ($72.5 million) for the 10-year and Sh8.33 billion ($82.5 million) for the 30-year papers in interest payments.

The payments due at the end of last week therefore stood at Sh7.82 billion ($77.5 billion), with a similar amount due to be paid at the end of August.

As the fiscal agent and banker to the government, CBK normally makes the interest payments, and also buys up the proceeds of foreign loans from Treasury for the money to be used locally in form of shillings.

The reserves had hit an all-time high of $10.08 billion (Sh1.02 trillion) in June 2019 after the CBK bought $2.1 billion (Sh212 billion) the government got from the sale of yet another Eurobond in May 2019.