Last week, the reserves stood at about Sh900 billion ($8.958 billion), equivalent to an import cover of 5.99 months.
This is the lowest level since April 12 when it was at 5.90 months.
The latest fall came during a week in which the shilling strengthened slightly against the dollar to stand at 100.76 units against 101.14 units at which it had closed the previous week.
The import cover of official foreign exchange reserves fell to the lowest level in two-and-half months last week, halting a generally bullish trend that had persisted for weeks.
The reserves stood at about Sh900 billion ($8.958 billion), equivalent to an import cover of 5.99 months. This is the lowest level since April 12 when it was at 5.90 months.
The latest fall came during a week in which the shilling strengthened slightly against the dollar to stand at 100.76 units against 101.14 units at which it had closed the previous week – thanks to the currency’s shortage and reduced demand for dollars.
The actual forex reserves fell by $32 million or Sh3.2 billion as at June 21 compared to June 14 although the Central Bank of Kenya (CBK) did not reveal whether this resulted from its direct intervention.
There was some demand of Kenya shillings in the interbank market because of the need to remit value added tax (VAT), the CBK said without disclosing whether it actually traded any dollars with local currency.
“The number of deals traded [in the interbank market] increased to an average of 29 from an average of 24 as banks sought funds to remit VAT.
Similarly, the weighted average interbank rate increased to 4.05 per cent from 3.59 per cent in the previous week, said the CBK in its weekly bulletin.
However, analysts at Genghis Capital, an investment bank, said the CBK pumped in local currency into the market to make it more liquid in the wake of the constraints imposed by tax payments.
“The money market continued to strain [last] Friday hitting 6.1 per cent on pressure from quarterly tax payments. This saw the regulator step in. Citing skewed liquidity, it offered Sh15 billion and Sh11.13 billion was accepted,” said the investment bank.
Besides the tightness in availability of the shilling, market watchers also noted that there was reduced activity in the forex market which in turn helped the shilling’s strength towards the end of last week.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
