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Stable shilling helps push up Kenya's dollar reserves

Xinhua, March 29, 2016 Adjust font size:

Kenya's foreign exchange reserves have swelled to a year high of 7.4 billion U.S. dollars as the shilling stabilizes against major world currencies.

The rise in the reserves, which are 4.72 months of import cover, indicates that the Central Bank of Kenya (CBK) has not sold as much dollars as it did in the past to cushion the local unit from depreciation pressure, new data showed Tuesday.

The shilling is currently exchanging against the U.S. dollar at an average of 101, where it has stabilized for over a month now from 103 months back.

According to the apex bank, the Kenya shilling last week stabilized against the dollar and strengthened against the East Africa Community regional currencies.

The stable shilling has, therefore, helped the CBK pile the dollar reserves leading to the current surge, which was last witnessed in January 2015.

Kenya's dollar reserves hit a high of 7.6 billion dollars or 4.90 months of import cover towards the end of 2014 after the country received proceeds of a sovereign worth 2 billion dollars.

They, thereafter, started to decline hitting a low of 6.1 billion dollars in October last year before they started to record marginal gains every week to the current level.

Analysts noted that the country's positive foreign reserves outlook led to the holding of the Central Bank Rate at 11.5 percent last week during the regulator's monetary policy committee meeting. They expect the reserves to continue with an upward trajectory if the shilling remains stable.

Kenya's top sources of foreign exchange reserves include tourism, which is fast-recovering, inflows from Treasury bills and bonds, loans from bilateral partners and diaspora remittances.

Besides being used to bolster the currency, forex reserves are used in payment of external debt and settling of the import bill, whose major component is oil.

With the oil prices having plummeted, Kenya's import bill has dropped considerably, therefore, improving the balance of payments. Enditem