Kenya's foreign reserves fall to 6.9 bln U.S. dollars
02 December 2014, 09:22
Nairobi - Kenya's foreign exchange reserves have maintained a steady decline to record a low of 6.9 billion U. S. dollars or 4.5 months of import cover, Central Bank of Kenya (CBK) data showed Monday.
The reserves are seemingly headed to a major fall since Kenya successfully sold a 2 billion dollars Eurobond and used the proceeds to bolster its foreign exchange stock.
The money raised from the Eurobond pushed up East African nation's foreign exchange reserves to a high of 7.35 billion dollars, the largest in the country's history.
However, the reserves that peaked on Sept. 18 have been shrinking since then, declining below the 7 billion dollars mark or 4.58 months of import cover on November 20.
They dropped further in the week ending Nov. 28 to 6.9 billion dollars, down from 6.96 billion dollars, the CBK data contained in its weekly bulletin showed.
A decline in the foreign exchange reserves, particularly below the requisite four months cover, means that the regulator cannot successfully intervene in the forex market in case the local unit (Shilling) is under pressure from international currencies.
The shilling has slump against major world currencies to exchange against the U.S. dollar at an average of 90.1, against the Sterling Pound at 141.6 and the Euro at 112.4.
The currency remained stable against the U.S. dollar at 86 for over two years until two months ago. The local unit's decline corresponded with steady drop in foreign exchange reserves.
Analysts have attributed the faster decline of the reserves, and consequently the local currency, to rise in East African nation's imports.
Kenya's imports surged to 1.8 billion dollars a month in September from 1.2 billion dollars in February, according to Kenya National Bureau of Statistics data.
Industrial supplies, fuel and lubricants and machinery take the largest share of Kenya's imports.
Kenya is currently working on major infrastructure projects in transport and energy sector that have led to importation of huge machinery.
Exports, on the other hand, stood at 450 million dollars in September, down from 544 million dollars in June.
Consumer goods and industrial supplies form the bulk of Kenya's exports, whose key destination is Uganda and Tanzania. The trade imbalance means Kenya is spending more foreign currency than it is getting.
The situation has been exacerbated by the decline in foreign exchange inflows from major earners like tea, coffee and horticulture produce, and tourism, which has taken a beating due to insecurity challenges following persistent terror attacks.
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