Central Bank of Kenya has reported a fall in foreign reserve from Sh871 billion ($8.50 billion] to Sh823 billion ($8.03 billion), a Sh50 billion drop from September 2018.
The reserve which is meant to cushion the economy in paying liabilities if need be, shrunk flooring the country’s import cover which according to CBK’s report is currently holding on at 5.3 months.
The shrink in forex reserves has been linked to the weakening of the shilling against the dollar currently trading at 102.67. However, the bank regulator said that the shilling maintained its value while projecting growth at 6.2 percent by the end of quarter three, 2018.
“The CBK’s own calculations support the view that there is no fundamental misalignment reflected in our exchange rate. The Kenya Shilling reflects the currency's true, fundamental value,” said CBK.
CBK recently released data showing the status of import cover and foreign exchange reserves in its capital account. The reserves were $8.507 billion (Sh859.67 billion) as at September 20 with import cover standing at 5.6 months compared to a previous average of 5.76 months.
The bank regulator through a statement said that inflation remained well fastened through the month of September and October with records showing inflation declined from 5.7 percent to 5.5 respectively.
The decline does not bear a bad effect however, it lowers foreign investments and increases the risk of a country losing the amount of foreign reserves held by its central bank.