Foreign exchange reserves held at the Central Bank of Kenya have fallen by $201 million (Sh21.5 billion) in the past two weeks, partly on account of interest payments on the Eurobond floated in May 2019.
Latest data from the CBK shows the reserves stood at $8.331 billion (Sh891.4 billion) on May 28, down from $8.532 billion (Sh912.9 billion) on May 14.
“The CBK usable foreign exchange reserves remained adequate at USD8,331 million (4.99 months of import cover) as of May 28. 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 their latest weekly bulletin.
The $2.1 billion (Sh224.7 billion) Eurobond that Kenya floated on May 15, 2019, was in two tranches of $900 million (seven-years) and $1.2 billion (12-years), attracting interest at the rate of seven and eight percent per annum respectively.
The interest is paid in two equal instalments every six months, working out to $79.5 million (Sh8.5 billion) every May and November.
The CBK might also have used some of the dollars in the past two weeks to service other foreign debt, make payments for foreign purchases on behalf of the government or support the shilling in the market through the sale of hard currency.
The shilling is currently exchanging at 107 units to the dollar, with the regulator normally coming into the market to smooth out volatility either through sale or purchase of hard currency depending on the direction of the exchange rate movement.
The CBK said last week during a policy rate briefing that the reserves are expected to remain adequate going forward, helped by substantial inflows from international financing institutions such as the World Bank.
The reserves had been boosted in the first half of May by an injection of $739 million (Sh79 billion) from an economic support loan from the International Monetary Fund.
The World Bank has lent Kenya $1 billion (Sh107 billion) for and Covid-19 and budgetary support, which will boost reserves significantly once the Treasury sell the dollars to CBK, and another $43 million to fight the locust menace.
The Africa Development Bank has also given Kenya a loan of 188 million euros (Sh22.1 billion) to boost the fight against the Covid-19.