Central Bank of Kenya (CBK) foreign exchange reserves dropped by Sh12.6 billion in the seven days to Friday, marking a 43-week low.
The forex reserves, which now stand at $8.298 billion (Sh879.58 billion) have fallen from the $8.41 billion reported a week earlier and a further Sh22 billion in a month.
The reserves have been on a five-week downward streak as the Central bank was forced to sell dollars and mop up shillings in the local markets to fight volatility. The continuous drop is attributable to the coronavirus pandemic that has claimed over 13,000 lives globally, with Kenya reporting 15 cases so far. The virus has continued to put pressure on local currencies all over the world as investors steer clear from unstable currencies.
The erosion in reserves comes at a time the regulator has been battling to help keep the shilling stable as its value dropped to more than a four-year low exchanging at 106 against the dollar in the early hours of trading on Monday.
The current level represents a 43-week low covering only 5.04 months of import, the lowest value since May 23 last year when they dropped to $7.98 billion covering only 5.08 months of import.
The statutory requirement is that the bank endeavours to maintain at least four months of import cover meaning the current level is still adequate.
“The CBK usable foreign exchange reserves remained adequate at $8.29 billion (5.04 months of import cover) as of March 19,” said the regulator in the report.
“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.”
Forex reserves help protect local currencies during economic shocks.