Forex reserves fall by Sh22bn

A $201 million drop in Foreign exchange reserves held at the Central Bank of Kenya has seen them fall from $8.532 billion (Sh912.9 billion) as of May 14th  down to $8.331 billion (Sh891.4 billion) by May 28th. This has been partially attributed interest payments on the May 2019 Eurobond.

However, this still meets CBK’s required statutory minimum reserves that should be able to cover at least four months of import cover as well as the EAC region’s convergence criteria of four and a half months of import cover.

The Eurobond floated by Kenya in May 2019 amounting to $2.1 billion came in two tranches of $900 million (7 years) and $1.2 billion (12 years) with the rate of interest being 7 and 8 percent respectively.

The interest payments are made every 6 months in two equal installments of  $79.5 billion (Sh8.5 billion) ever May and November.

CBK may also have used some of the dollar reserves to service other foreign debts, support the shilling (which is currently trading at Sh106.70 units to the dollar) through the sale of hard currency, or paying for foreign purchases on behalf of the government.

During a policy rate briefing last week, CBK said that the reserves are projected to remain adequate going forward with the aid of significant inflows from international financiers such as the World Bank.

The reserves received a $739 million (Sh79 billion) boost from the International Monetary Fund in the first half of May as an economic support loan.

An additional $1 billion has been lent to Kenya by the World Bank to support the budget in light of the Covid-19 pandemic.