Roundup: Kenya's dollar reserves rise as inflows from gov't securities surge

Kenya's foreign exchange reserves have risen to a three-month high following increased inflows from government securities.

The reserves, which have been on downward spiral since July, rose this week to 6.44 billion U.S. dollars or 4.1 months of import cover, from 6.25 billion dollars or 3.98 months of import cover the previous week, the Central Bank of Kenya (CBK) said in its weekly report Saturday.

At the start of July, the reserves stood at 6.7 billion dollars or 4.21 months of import cover falling to a low of 6.11 billion dollars in the first week of this month.

The low reserves were partly blamed for the fall of the shilling to 106 dollars against the U.S. dollar as the Central Bank could not effectively intervene to save the local currency.

However, a move by the regulator to increase its benchmark interest rate to 11.5 percent has led to the stabilisation of the shilling, and brought in dollar reserves through the sale of government securities, according to analysts.

Interest rates on the government securities have risen to a high of 23 percent for the 91-day Treasury bills, and 22 percent for the 182-day and 364-day bills.

Besides the short-term papers, the government is also selling bonds, whose yields average 23 percent.

The high rates have attracted huge interest from foreign investors, with most of the offers put on sale being massively oversubscribed.

This week, the CBK put on sale 91-days bills worth 39 million dollars. The papers attracted bids worth 144 million dollars and the bank accepted 120 million dollars.

Similarly, the bank put on sale 182-day and 364-day bills worth 39 million dollars each. For the 182-day bill, the banks received bids worth 47 dollars and accepted all of them.

The 364-day bills raised bids worth 200 million dollars and the CBK accepted 158 million dollars.

Besides the short-term securities, the CBK put on sale a one-year bond worth 194 million dollars. It received bids worth 306 million dollars and accepted 199 million dollars.

With a huge section of those taking part in trading at debt market being foreign investors, the high bids have helped boost foreign exchange reserves at a time when East African nation's inflows from tourism and exports are on the decline.

Kenya's tourism has taken a beating as the East African nation faces increased terror attacks from the Al-Shabaab, with the worst happening on April 2 at Garissa University College where the Somali-based militants killed 148 people, 142 of them students.

Tourism is one of Kenya's top foreign exchange earners, bringing in over 1 billion dollars annually. Endit