CBK: DP Rigathi Gachagua wrong on Kenya's forex situation

Central Bank Governor Patrick Njoroge. [Wilberforce Okwiri, Standard]

Central Bank of Kenya (CBK) has refuted claims by Deputy President Rigathi Gachagua that there is a forex shortage in the country.  

Gachagua, in an interview with Citizen TV on Sunday, October 2, 2022, claimed that the country's financial situation is so bad that it lacks sufficient foreign exchange reserves to import oil.

"Tumekosa maneno ya Foreign Exchange hata jana pale katika benki kuu hakukuwa na zile pesa za kigeni za kutosha kuagiza mafuta kutoka nchi za nje (We have insufficient foreign exchange and the Central Bank does not have enough foreign currency for importing fuel),” said Gachagua in an interview at his Wamunyoro residence in Nyeri on Sunday.

He claimed the previous government looted money three months before the August 9 election, leaving public coffers in a dire situation.

However, in a statement on Monday, October 3, CBK clarified that the foreign exchange reserves continue to provide adequate cover and a buffer against shocks in the foreign exchange market.

“First, following the complete liberalization of the foreign exchange market in the 1990s, all foreign exchange for private transactions is obtained from commercial banks. CBK does not supply foreign exchange for transactions other than for the National Government. Second, the foreign exchange cover remains adequate,” CBK said in a statement.

Kenya’s forex reserves closed on Thursday, September 29, at $7.42 billion, equivalent to what the country can use on imports within 4.19 months.

The current import cover meets the CBK’s statutory requirement of maintaining at least four months of import cover.

However, the figure is below the East African Community’s convergence criteria of 4.5 months of import cover.

Kenya’s forex reserves have come under pressure due to debt repayment obligations and the weakening shilling which has increased interest payable on foreign debt.

However, diaspora remittances and exports have continued to offer some cushion to the forex reserve.

During his address at the 77th Session of the United Nations General Assembly (UNGA) in New York, President William Ruto asked international money-lending institutions to take it easy on debts owed by developing countries.

He called on International Monetary Fund [IMF], World Bank and other money lenders to extend pandemic-related debt reliefs to Third World Countries.

Ruto urged 20 of the world’s richest nations to either suspend or reschedule debt repayments for third-world countries.

“I join other leaders in calling upon the World Bank, the International Monetary Fund and other multilateral lenders to extend pandemic-related debt relief to the worst hit countries, especially those affected by the devastating combination of conflict, climate change and covid-19,” Ruto told the Assembly.

 

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