A report on the financial markets released on Friday evening showed that Kenya’s foreign exchange reserves dropped by 25 billion shillings in the week ending Nov.12, as the Central Bank released dollars into the market to support the local currency.
According to the Central Bank of Kenya (CBK), the reserves fell from 9.09 billion dollars, an equivalent of 5.56 months of import cover, to 8.87 billion dollars, or 5.42 months of import cover.
The shilling hit its lowest level ever against the dollar during the period, exchanging at 112.1, from 111.1 in the week.
Dollar inflows from key exports like tea and horticulture have been falling amid high demand for foreign currencies for oil, machinery, and capital equipment exports since the beginning of November. This has subjected the local currency under pressure.
A weak shilling leads to an increase in the cost of imports since more units of the local currency are needed in the trading process.
The shilling also fell against the other major global currencies including the Pound Sterling and the Eur.
Despite the decline in dollar reserves, the apex bank, however, said the 8.87 billion dollars are still adequate.
“This meets the CBK’s statutory requirement to endeavor to maintain at least four months of import cover, and the East Africa Community’s region’s convergence criteria of 4.5 months of import cover,” the apex bank said.