Usable dollars reserves have hit an 12-week low, which the Central Bank of Kenya (CBK) reported could afford Kenya exports worth nearly six months.
Kenya has $9.2 billion or 5.78 months of import cover, according to CBK weekly statistical bulletin published last week.
This was a level last seen in June 4 when $9 billion could cover Kenya for 5.74 months of importation.
However, CBK notes the money was enough to meet East African target of four months of imports.
“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,” the CBK said.
Kenya’s dollars are mainly sourced from issuing dollar loans more than accruing the forex from exports.
This risks wiping out the dollars if she pays exports, which has informed the strategy to borrow more money to settle principal payments as witnessed in the October 2015 syndicated loan and the first tranche of the Eurobond in June.
Kenya’s foreign loans denominated mostly in dollars have increased from Sh800 billion in June 2013 to Sh2.4 trillion in June last year.
But they have fallen as CBK fought currency volatility and paid of loans.
Kenya will make its first Standard Gauge Railway principal payment in January having exhausted the five-year holiday.
Meanwhile Kenya’s export (goods only) earnings have increased from Sh499.7 billion in 2012 to Sh544.6 billion in June 2018 while external debt service increased from Sh31 billion in 2012 to Sh220.6 billion last year.
Remittances, another crucial source for the dollars, rose to an all-time high in June amounting to $295 million compared to $243 million in May.
The 12-month cumulative inflows to June 2019 increased to $2,768 million from $2,438 million in the 12 months to June 2018, reflecting a 13.6 percent growth.
Kenya’s dollar reserves are currently crucial in propping the value of the shilling against volatility since the country is yet to secure an insurance buffer from the International Monetary Fund.
Reuters news reported that the Kenyan shilling at 103.65 to the dollar had weakened on Monday due to increased dollar demand from the energy sector and general goods importers and excess liquidity in the money markets.