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Foreign reserves fall Sh37bn as State repays syndicated loan

The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG
The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG 

The Central Bank’s foreign exchange reserves fell by Sh36.8 billion ($367 million) last week with market analysts attributing it to repayment of a maturing syndicated loan.

The reserves stood at an all-time high of $9.51 billion (Sh953.4 billion) in the week ending April 27, before retreating to $9.142 (Sh916.6 billion) last week.

Kenya was due to settle an outstanding Sh64.6 billion ($646 million) of the two-year $750 million (Sh75 billion) syndicated loan it took in October 2015 by the end of April, having negotiated a six month extension of the redemption with some of the creditors of the facility as the government sought rollover financing.

“Usable foreign exchange reserves held at the Central Bank of Kenya (CBK) declined by $367 million (Sh36.8 billion) in the week. The drop in forex reserves is likely attributed to the retiring of the outstanding two-year extended syndicated loan that matured in the prior week,” said Genghis Capital in its weekly fixed income bulletin. Following last week’s reduction in reserves, the country’s import cover has come down to 6.11 months from 6.36 the previous week.

Even with the payment the reserves remain formidable given that the cover is well above the required four months.


The build-up of reserves this year has been helped in large part by the purchase of the proceeds of the $2 billion Eurobond issued in March. The strong reserve position has underpinned the shilling against major currencies, especially the dollar, which is now exchanging at 100.26 per unit compared to 103.30 at the beginning of the year.

There have also been strong dollar inflows from diaspora remittances and horticulture exports, supporting the growth in reserves.

Latest CBK data shows March diaspora remittances grew by 5.6 per cent to stand at Sh22.3 billion ($222.2 million) compared to Sh21.1 billion ($210.4 million) in February.

“The 12-month cumulative inflows to March 2018 stood at $2.16 billion (Sh216 billion), 23.8 per cent higher than the $1.74 billion (Sh175 billion) recorded over the same period in 2017,” said CBK in its latest weekly bulletin.

“The improved performance reflects increased uptake of financial products by the diaspora and new partnerships between commercial banks and international money remittance providers.”