- The Central Bank of Kenya (CBK) has increased its foreign exchange reserves to USD 8.491 billion, sufficient to cover 4.4 months of imports, meeting its statutory requirement
- CBK Governor Kamau Thugge attributed the growth in dollar reserves to increased foreign exchange inflows from banks and remittances, as well as CBK’s purchase of foreign currency to stabilize the exchange rate
- Growing forex reserves and a steady exchange rate are expected to boost investor confidence by reducing currency volatility and financial risks
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Elijah Ntongai, a journalist at TUKO.co.ke, has more than three years of financial, business, and technology research and reporting expertise, providing insights into Kenyan and global trends.
The Central Bank of Kenya (CBK) has further increased the country’s foreign exchange (forex) reserves.
In the latest data, CBK indicated that it now holds US dollar reserves sufficient to cover 4.4 months of imports. CBK is required to hold forex reserves sufficient to cover at least four months of imports.
“The usable foreign exchange reserves remained adequate at USD 8,491 million (about KSh 1.1 trillion) (4.4 months of import cover) as of October 17. This meets the CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover,” CBK reported.
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Notably, Kenya’s forex reserves have grown for six consecutive weeks, with the latest report indicating a growth of USD 244 million (about KSh 31 billion) from the USD 8,247 million (about KSh 1.064 trillion) record set on October 8, 2024.
How CBK increased dollar reserves
In a recent broadcast, the governor of the CBK, Kamau Thugge, explained that the regulator has been making deliberate efforts to increase dollar reserves.
Kamau explained that CBK has significantly increased foreign exchange inflows from banks and remittances.
He further noted that CBK has also been buying foreign currency from the market to shore up its reserves and moderate market volatility.
“In order to moderate the fluctuations and volatility in the exchange rates, we have indeed been buying foreign exchange (foreign currencies), and that is part of our role, and that is part of our business,” Kamau stated in the broadcast.
Implications of growing dollar reserves
Speaking to TUKO.co.ke, Daniel Kathali, an economist opined that the growing dollar reserves and steady exchange rate are critical in promoting investor confidence.
Kathali explained that foreign investors want stable markets with low financial risks, as they may lose their investments due to currency volatility.
“CBK’s efforts in stabilizing the exchange rate have at least resolved one of the factors that would have made investors shy away from these groups. Having adequate forex reserves means Kenya now has the ability to meet its external obligations, such as debt payments and import demands, and there is lower risk of currency shortages or volatility.
A steady exchange rate significantly reduces the risk of sharp currency depreciations, which can erode foreign investors’ investment returns. These factors create a more predictable economic environment, which encourages both foreign direct investment (FDI) and portfolio investment because investors prefer stable markets with lower financial risks,” Kathali said.
Kenya shilling maintains steady exchange rate
As earlier reported on TUKO.co.ke, the Kenya shilling maintained a stable exchange rate against major global and regional currencies.
The sufficient reserves have ensured that the CBK can meet any arising demand for foreign currencies, thus moderating fluctuations in the exchange rates.
In the week ending October 17, 2024, CBK indicative rates showed that the shilling traded at KSh 129.20 per dollar, even as the US currency index gained 0.87%.
Source: TUKO.co.ke
