Nelly
Member
Dollar/ foreign exchange reserves at the Central Bank of Kenya (CBK) have touched a near 12-months high from new loan disbursements in recent weeks.
According to data from the CBK, the reserves hit Ksh.1.02 trillion ($9.49 billion) this past week, the highest level seen since the week closing on July 16 last year.
The strengthened reserves are highly attributable to the receipt of funds from new loans by the World Bank and the International Monetary Fund (IMF) in the last two weeks.
The latter disbursed Ksh.44B last week representing the second-tranche of a wider Ksh.252 billion ($2.34 billion) three-year loan facility while the World Bank approved a Ksh.81B loanon June 11.
The greater reserves now represents an enhanced 5.8 months of import cover.
This to push coverage further above CBK statutory requirement of maintaining at least four months of import cover and the EAC criteria of 4.5 months of import cover.
Kenya holds the bulk of its currency reserves in dollars and uses the reserve as a shock absorber against factors negatively affecting the local currency’s exchange rate.
The CBK and other Central Banks around the world uses the reserves to maintain a steady rate on the local currency by buying and selling the reserve currency to prevent fluctuations on its own currency.
At the same time, the stock of foreign currency is deployed in offsetting foreign debt obligations including interest and redemption.
The peak reserves complements an already steady shilling which traded at Ksh.107.94 against the US dollar at Friday’s close having recorded gains of about 1.2 per cent in the year so far.
CBK foreign currency reserves sank rapidly after October 2020 as the reserve bank deployed the cushion to fight off volatility in the valuation of local currency.
In Mid-December, the shilling traded at an average Ksh.111.55 its weakest level in history as the local unit came under fire from investor uncertainty and an unmatched demand for dollars in the inter-bank market.
Even then, the level of reserves held above the 4.5 months import coverage threshold with the CBK finding a tough balance between selling more dollars to quell volatility and maintaining sound buffer levels.
According to data from the CBK, the reserves hit Ksh.1.02 trillion ($9.49 billion) this past week, the highest level seen since the week closing on July 16 last year.
The strengthened reserves are highly attributable to the receipt of funds from new loans by the World Bank and the International Monetary Fund (IMF) in the last two weeks.
The latter disbursed Ksh.44B last week representing the second-tranche of a wider Ksh.252 billion ($2.34 billion) three-year loan facility while the World Bank approved a Ksh.81B loanon June 11.
The greater reserves now represents an enhanced 5.8 months of import cover.
This to push coverage further above CBK statutory requirement of maintaining at least four months of import cover and the EAC criteria of 4.5 months of import cover.
Kenya holds the bulk of its currency reserves in dollars and uses the reserve as a shock absorber against factors negatively affecting the local currency’s exchange rate.
The CBK and other Central Banks around the world uses the reserves to maintain a steady rate on the local currency by buying and selling the reserve currency to prevent fluctuations on its own currency.
At the same time, the stock of foreign currency is deployed in offsetting foreign debt obligations including interest and redemption.
The peak reserves complements an already steady shilling which traded at Ksh.107.94 against the US dollar at Friday’s close having recorded gains of about 1.2 per cent in the year so far.
CBK foreign currency reserves sank rapidly after October 2020 as the reserve bank deployed the cushion to fight off volatility in the valuation of local currency.
In Mid-December, the shilling traded at an average Ksh.111.55 its weakest level in history as the local unit came under fire from investor uncertainty and an unmatched demand for dollars in the inter-bank market.
Even then, the level of reserves held above the 4.5 months import coverage threshold with the CBK finding a tough balance between selling more dollars to quell volatility and maintaining sound buffer levels.