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Kenya shilling slides 0.2 pct pushing forex reserves 110 mln USD down

Xinhua, January 16, 2017 Adjust font size:

The Kenya shilling depreciated 0.2 percent last week against the U.S. dollar forcing the Central Bank of Kenya to dig into its foreign exchange reserves to bolster it.

The shilling closed the week at 103.9, against last week's 103.8, with the Central Bank using over 110 million dollars to save the currency from depreciating further, new data from the regulator showed Monday.

During the week, official foreign exchange reserves declined from 7.06 billion dollars or an equivalent of 4.62 months of import cover to 6.94 billion dollars or 4.55 months of import cover.

"The reserves level declined during the week indicating that the Central Bank used 114 million dollars to support the shilling," Cytonn, a Nairobi-based investment firm noted Monday.

Cytonn attributed the depreciation of the shilling to heightened dollar demand from oil importers in anticipation that the shilling is expected to weaken further.

The firm expects the shilling to come under pressure following the global strengthening of the dollar and the increasing world oil prices.

This means the Central Bank's foreign exchange reserves would fall further as the regulator uses them to bolster the shilling, which was trading Monday morning at 103.9 against the dollar.

"However, it is important to note that if the reserve levels drop too low, the government can access the International Monetary Fund credit facility, comprised of a 989.8 million dollars 24-month Stand-By Agreement and 494.9 million dollars 24-month Stand-By Credit Facility, bringing the combined facility to 1.5 billion dollars," said Cytonn.

Treasury last week noted the government has initiated plans to raise 1.1 billion dollars through syndicated loans as part of the budget financing for this fiscal year.

"The proceeds shall comprise of 250 million dollars secured from PTA Bank and 800 million dollars expected to come in from international banks. They are also expected to assist the government in boosting its foreign reserves, and in the process, bring stability to the shilling," said Cytonn. Endit