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Forex reserves at month's low amid dollar shortage

BUSINESS
By Dominic Omondi | Jun 24th 2022 | 2 min read
By Dominic Omondi | June 24th 2022
BUSINESS
Caption

Foreign exchange (forex) reserves dropped to $8.11 billion (Sh952.6 billion) on June 16, this year as the country paid some of its debts amid a dollar shortage crisis.

This was a drop of $96 million (Sh11.3 billion) and the lowest since March 31, this year according to data from the Central Bank of Kenya (CBK). On June 9, this year, the forex reserves stood at $8,210 million (Sh963.8 billion).

This was even as remittances from Kenyans living and working in the diaspora also dropped month-on-month to $339.7 million (Sh40 billion) in May compared to $355 million (Sh41.53 billion) in April.

However, the CBK remained bullish that the reserves, which could cover the country’s imports for 4.82 months, were adequate. “This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover, and the EAC (East African Community) region’s convergence criteria of 4.5 months of import cover,” said CBK in its weekly bulletin.

The dollar is the reserve currency in the global economy. It is held widely by governments, central banks and private institutions to conduct international trade and financial transactions.

Other major reserve currencies include the euro, Japanese yen, Swiss franc, British pound, Canadian and Australian dollars, and the Chinese renminbi.

The National Treasury, which insists there are enough dollars, says there is an artificial shortage that has been created by alarmist comments by manufacturers led by their lobby, the Kenya Association of Manufacturers.

Traders, though, have also used more dollars to import products whose prices have shot up in the international market. These include palm oil, wheat, fertiliser and refined petroleum products.

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