Kenya's foreign exchange reserves plummet as shilling hits new low

Kenya's foreign exchange reserves experienced a decline of 112 million U.S. dollars this week, adding pressure on the local currency, the shilling, which reached a historic low of 147 to the dollar, the Central Bank of Kenya said in its update on the financial markets issued on Friday.

The reserves, as per the apex bank, amounted to 6.95 billion dollars at the week's end, equivalent to 3.76 months of import cover, marking a decrease from the previous week's figure of 7.06 billion dollars.

The shilling concluded the week at 147.36 against the dollar, marking a historic low, according to the bank. Over the past year, the local currency has witnessed a 22 percent decline against the dollar, and the Central Bank has faced challenges in stabilizing it due to dwindling forex reserves.

Nevertheless, the bank emphasized that despite the decrease, the foreign exchange reserves continue to be adequate for covering the country's import needs and supporting the local currency. "The reserves meet the statutory requirement to endeavor to maintain at least four months of import cover," said the apex bank.

On Sept. 14, the bank issued an order to firms remitting money abroad, limiting them to selling no more than 100,000 dollars to individual buyers per day unless they transact through commercial banks, a measure aimed at protecting the reserves.

Central Bank Governor Kamau Thugge attributed the shilling's decline and the decrease in reserves, in part, to the increase in benchmark interest rates in the United States.