Bad time for Kenya shillings as it shrinks further

Kenya’s forex reserves dropped for the fourth week running as the Central Bank released more dollars in the market to cushion the shilling from further weakening.

The weekly bulletin by the apex bank shows the country’s foreign currency reserve dropped by Sh55 billion to $9.43 billion  Sh1.04 trillion in the week ended Friday October 1 from $9.52 billion (Sh1.05 trillion) last week.

The usable foreign exchange reserves remained adequate at 5.77 months of import cover compared to 5.82 months the pervious week.  

”This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover,” CBK said. 

The country’s reserve dropped for the better part of September despite the country receiving sizable amount of forex from diaspora remittances, agricultural exports and recovering tourism sector. 

The reserves have shrunk at least Sh200 billion in the last one month, dropping from  $9.63 billion  since the begging of last month to $9.43 billion. 

Besides, the regulator submitted Sh5.5 billion to the National Treasury, raising its annual disbursement to the exchequer to Sh10 billion this year.

The funds were drawn from the central bank reserves, CBK said in a statement.

This distribution is in accordance with sections 9 and 51 of the CBK’s Act relating to the treatment of the CBK’s net annual profit and followed approval by the CBK board.

The local currency has been dropping against major international currencies for the last two months, dropping to a low of 111 against the greenback early last week.

It exchanged at 110.49 per US dollar on September 30, compared to  110.39 per US dollar on September 23.

Even so, CBK insisted that the shilling was stable against major international currencies. 

The continued depreciation of the local currency against the dollar which has over 80 per cent acceptance in the international market is hurting households who are forced to carry the import burden passed to them by traders.

This is one of the reasons that saw the cost of living  increase to 6.91 per cent compared to 6.57 per cent the previous month. 

The post Bad time for Kenya shillings as it shrinks further appeared first on Uzalendo News.

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