Kenya’s import cover has fallen by $172 million (Sh17.76 billion) in a month, signalling renewed dollar demand as the country nears October 26 repeat presidential poll.
Foreign exchange reserves dropped further by $39 million (Sh4.03 billion) last week to $7.373 billion (Sh761.48 billion) or 4.90 months of import cover, latest report from the Central Bank of Kenya (CBK) shows.
The reserves have fallen steadily since the week ending September 14 when they stood at $7.55 billion (Sh779.39 billion).
The drop implies renewed pressure possibly from corporates, importers and government after largely muted demand in the wake of prolonged political uncertainty after the August 8 presidential election was annulled.
Genghis Capital senior research analyst Churchill Ogutu said the pressure on reserves is likely coming from corporates who may be accumulating dollars as political uncertainty intensifies.
“My hunch is that corporates may be stock-piling just before the elections to be on the safe side and we saw a bit of that just before the August election,” Mr Ogutu said on phone.
“There may be also a bit of support for the shilling (by the CBK) because in all these risks that we have been seeing and flagging off, the shilling shouldn’t have been this stable.”
The shilling has been steady against the US dollar this year, having fallen by a marginal 0.68 per cent since the beginning of the year.
Aly-Khan Satchu, the chief executive of investment advisory firm Rich Management Group, said the shilling has largely benefited from rising diaspora remittances.
The remittances hit a 13-year high in August at $166.4 million (about Sh17.18 billion), CBK data showed last week.
Mr Satchu, however, said the value may be grossly underestimated.
“Remittances are notoriously difficult to capture because so much comes through informal channels and I estimate that Remittances are seriously undercounted,” he said via an email.