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Kenya's dollar reserves swell to 7.7 bln USD, boost shilling

Xinhua, May 9, 2016 Adjust font size:

Kenya's foreign exchange reserves have ballooned to 7.71 billion U.S. dollars, a new high in recent times.

The reserves, one of the largest Central Bank of Kenya (CBK) has ever kept, equal five months of import cover, data from the apex bank showed Monday.

The huge dollar reserves have helped to strengthen the shilling, which last week hit a nine-month high of 100.6 against the U.S. dollar, an indication that the local unit is gaining momentum and may fall below the 100 mark.

"The shilling strengthened against the US dollar on the back of improved inflows to various sectors," said the CBK in the weekly bulletin Monday.

The foreign exchange reserves have been on the rise since February, where they stood slightly above 7 billion dollars or 4.5 months of import cover.

The huge dollar reserves mean the CBK can effectively intervene to save the shilling if it comes under pressure from international currencies.

Low foreign exchange reserves were blamed for the fall of the shilling to 106 dollars against the dollar in September last year as the bank had insufficient dollars to release into the local market to save the local unit.

A stable shilling, however, means the CBK does not need to sell the dollar reserves to bolster the local currency, a situation that has contributed to the current surge.

CBK Governor Patrick Njoroge recently attributed the rise in dollar reserves, apart from the stable shilling, to lower oil prices, a falling current account deficit and more exports, which have helped bring in the inflows.

"There is an impact of lower oil prices which have improved the balance of payment. We see the current account deficit this year closing at 8 percent of the Gross Domestic Product," he said.

According to the Kenya Bureau of Statistics, the monthly oil import bill has dropped to 150 million dollars a month from a peak of 437 million dollars in July 2014.

Inflows from tourism, tea and horticulture too have helped bring in the much-needed foreign exchange.

Foreign investors, particularly those at the debt market have also sustained inflows as the government borrows more from the public.

Njoroge noted that the investors are going for long-term securities because of a favorable economic environment. Endit