More forex, but the freefall of the Shilling continues

Kenya’s foreign exchange reserves rose by $3.4 million (Sh377.4 million) in the last two weeks, but this was not enough to shield the shilling from Covid-19 blows.

Data from the Central Bank of Kenya (CBK) shows that the usable forex was at $7,954 million (Sh882.9 billion) as of December 3. This was a slight increase from $7,928 million (Sh880.6 billion) two weeks earlier.

The current forex levels are enough to cover import needs for 4.89 months, which is above the regulatory threshold of at least four months. But it is worryingly close to the East African Community’s convergence criteria of 4.5 months of import cover.

Increased external debt payments by the Treasury has put the shilling under pressure, despite a rise in diaspora remittances and a low import bill. An increased inflow of foreign currencies, however, arrested the free-fall of the local currency, which continued to cede ground against the dollar. These spooked importers who had to pay more dollars to buy goods.

“The shilling depreciated marginally against major international and regional currencies during the week ending December 3. It exchanged at 110.67 on December 3, compared to 109.86 per US dollar on November 26,” said CBK in its weekly bulletin.

The shilling has for the last six months been on a losing streak against the dollar.