Data by the Central Bank of Kenya in the weekly bulletin shows forex reserves dropped a massive Sh28 billion in the week ended September 2 to $7.37 (Sh884 billion) billion from $7.6 billion (Sh912 billion) the previous week.
”The usable foreign exchange reserves remained adequate at 4.2 months of import cover. This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover,” CBK said.
Even so, the country is in breach of East Africa’s Forex reserves policy, where members are expected to have above 4.5 months of import cover at all times. This is the third week Kenya’s FX reserves are below the regional benchmark.
The last time the forex reserves stood at such a level was in October 2017, underpinning the pressure the Central Bank is facing in a bid to shore up the forex reserves amid the decline of the shilling and increased demand for dollars by importers.
The east African nation’s foreign exchange reserves have sustained a downward trend in the past weeks as the apex bank uses part of its stockpile to stabilize the shilling against falling to a level that may disrupt the financial markets.
The country’s diaspora remittances, the leading contributor to FX reserves, have dropped in recent months due to high inflation in developed nations.
The amount of money sent home by Kenyans working abroad dropped for the sixth consecutive month in July.
Data by the CBK shows diaspora remittances to Kenya last month totalled $319.4 million (Sh38 billion) compared to $336.7 million (Sh40 billion) in July last year, a 5.1 per cent drop.
The inflows reported in July are the lowest since June last year, when the country received $306 million.
This was almost Sh1 billion lower than $326.1 (Sh38.9 billion) sent in June and Sh2 billion less in May.
During the week, the shilling declined to exchange at an all-time low of 120.05 against the dollar, down from an average of 119.72 the previous week.
The Kenyan currency has declined about six per cent against the dollar since the year began amid global crises like the Russia-Ukraine conflict that have disrupted major exports, including tea and horticulture, reducing inflows.
