? Four-month CBK dollar account when the country receives loans to stabilize its position.
Kenya’s foreign exchange reserves rose to a high of four months after the government account was credited with a loan of Sh78 billion from the International Monetary Fund (IMF).
The country’s foreign exchange stock – critical to meeting its external obligations such as import and payment of foreign debt – amounted to $ 15.532 million (Sh904 billion) per share. May 15, according to data from the Central Bank of Kenya (CBK).
It is the highest record since January 9, when the foreign exchange reserves stood at $ 8.543 million.
The IMF extended the loan of Sh78 billion to help stabilize the country’s external position.
Kenya has seen an increase in capital flight since reporting its first Covid-19 case in March, with foreign investors evacuating their assets to what they perceive as a safe haven.
High foreign exchange reserves offer significant relief for the country that has several external debt payments that are due.
“This (foreign exchange reserve) complies with CBK’s statutory requirement to endeavor to maintain at least four months of import coverage and the East African community’s region’s convergence criteria of 4.5 months of import coverage,” CBK said in its weekly bulletin.
In addition to the outflows, reduced export and tourism earnings have contributed to the depletion of foreign exchange reserves.
However, a record fall in global crude oil prices following a fall in demand has eased pressure on reserves, as close to a third of Kenya’s import bill is oil.
CBK data shows that current account deficits – the difference between export revenue and import payments – expand to 6.2 percent of gross domestic product (GDP) in the 12 months to March.
The CBK attributes this reduced earnings from horticulture and service exports, as countries around the world restricted the movement to restrict the spread of Covid-19.
“The preliminary balance of payments data shows that the current account deficit was estimated at 6.2 per cent. Of GDP in the 12 months to March 2020, compared with 5.8 per cent. In the 12 months to December 2019. This reflects lower revenue from horticulture and service exports, ”It said.
Despite the rise in forex and CBK, which continued to be active in the market through open market operations, the shilling lost ground against the dollar. It traded at an average of 106.81 against the greenback on Friday, down from 106.59 on Thursday.
“The Covid-19 pandemic is expected to significantly reduce growth by 2020 with a major impact on agricultural exports, services, transfers and the financial account, thus weakening the external position,” the IMF said in a statement.
Kenya has also rejected a debt moratorium offer from the richer nations of the G-20 to developing countries, with Treasury Secretary Ukur Yatani saying the conditions were restrictive and would have adversely affected the credit rating.