Drop in Kenya's forex reserves not a concern, says Patrick Njoroge

Central Bank of Kenya Governor Patrick Njoroge. Photo: Boniface Okendo, Standard 

A drop in Kenya's foreign exchange reserves is no cause for alarm, and speculators against the shilling in the run-up to national elections should "chill", central bank head Patrick Njoroge said on Tuesday.

The bank's hard currency reserves dropped to $7.80 billion last week, equivalent to 5.2 months of imports, and traders said the central bank has sold dollars in the market at least twice in recent days to support the local currency.

"We believe that our (reserves) cover is adequate," Njoroge told a news conference at the central bank, attributing the fall to government payments of just over half a billion dollars that were included in the budget.

He added that some of the recent pressure on the shilling was due to speculators betting about the outcome of the election, which takes place on Aug. 8.

"There is a lot of speculation out there... and frankly some of those speculators need to chill," he said.

Reserves were at a record high of $8.27 billion at the end of May, central bank data showed. Given the drop since then, traders have expressed concerns about the bank's ability to intervene further to support the shilling.

The Kenyan currency has been broadly stable against the dollar this year and Njoroge said this trend was expected to continue.

Njoroge said concerns about the recent closures of at least 10 bank branches by Barclays Kenya and other lenders was "overblown," saying technological innovations such as mobile phone banking were reducing the need for physical branches.

"We cannot just be stuck on brick and mortar," he said.