Kenya's dollar import cover shrinks to a seven-year low
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Loading... - Ali Mohamed
- 14 Oct 2022
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Kenya’s import cover has dropped to the lowest levels in seven years, reflecting lower foreign funding amid a faster growth in imports than exports and a slowdown in remittances from Kenyans abroad.
Latest Central Bank of Kenya data shows the stockpile of foreign currencies stood at $7.32 billion (Sh752.96 billion) last Thursday, a drop of $103 million (Sh12.45 billion) compared with the week before.
At that level, the large dollar reserves can cover the country’s import needs for 4.13 months, the lowest cushion since 4.10 months on October 22, 2015.
Foreign exchange reserves are largely tapped for government payments such as servicing external debts and essential government imports such as medicines.
The reserves, the bulk of which are in US dollars, also serve as backup funds in unlikely emergencies such as devaluation of the shilling, thus giving confidence to investors.
The CBK was last week reported having sold an unspecified amount of dollars to iron out volatility in the trade of the shilling which averaged 120.85 units against the US currency on Friday — a depreciation of 6.81 percent since the beginning of the year.
Kenya’s import cover is slightly above the statutory four months of import but has since July fallen below the desired 4.5 months cushion recommended by the seven-nation East African Community bloc.
“We have adequate reserves, but the [foreign exchange] markets need to improve in the way they are functioning. There was noise in the market as we came towards the electioneering period. That led to weaker performance of the market,” CBK Governor Patrick Njoroge told a press conference on September 30. “Now that all that has been resolved, we expect… continue to strengthen the market.” Read More...
