CBK dollar reserves rise by Ksh.8.8 billion as shilling extends gains

The Central Bank Kenya (CBK) dollar reserves have grown by Ksh.8.8 billion ($82 million) this past week on the back of new flows from external borrowing.

The new flows emanating from the first disbursements from the International Monetary Fund (IMF) last week, have pushed the reserve’s bank usable foreign currency reserves to Ksh.794 billion ($7.4 billion) from Ksh.783 billion ($7.3 billion).

The improved Forex cover is now representative of 4.6 months of Kenya’s imports cover from a cover of 4.5 months a week prior.

Subsequent to the inflows, the Kenya shilling has extended its gains against the US dollar to near a sub Ksh.107 mark with the local unit finding footing from greater dollar flows.

In early trading on Monday, the Kenyan shilling was quoted at Ksh.107.18 against the green buck having ended Friday’s trading session at Ksh.107.29.

This is the highest valuation for the shilling against the US dollar since the end of July 2020.

The local unit has months since been hit by a series of challenges including an unmatched demand for dollars in the domestic inter-bank market.

The shilling is expected to enjoy some relief in pressure supported by secondary IMF dollar flows and new disbursements expected including the World Bank and Eurobond issues set for later this year.

“The Kenya shilling strengthened against major international and regional currencies during the week on the back of increased Forex inflows,” CBK stated in its weekly report.

The CBK did not however state whether the recent strengthening amounted to volatility having previously emphasized its role in correcting volatility in the foreign exchange regime whichever the direction.

A stronger shilling which has marked nearly two per cent in gains against the green buck is expected to cut the cost of imports but has the reverse of raising the cost of local exports.

In its country report last week, the IMF asked the CBK to consider ‘weakening’ the local unit as cushioning for the economy as it continues to battle the effects of the COVID-19 pandemic.