Central bank’s forex reserve drops to Sh815.4 billion

Kenya’s forex reserve has dipped to Sh815.4 billion ($7965 million) during the period ending December 6, signifying a 5.3 monthly import cover during the period.

The forex reserve also known as foreign exchange reserves maintained a more than four months’ cover which is in line with East African Community standards of 4.5 months of imports cover as stated by the latest report by the Central Bank of Kenya.

Interbank volumes transacted as at December 6, went south from Sh27.2 billion to Sh13.1 billion while Interbank rate went up from 5.8 percent to 7.2 percent with the average interbank transactions declining from 39 to 33 in the past week.

At the time, commercial banks marked a low of Sh8.5 billion, short of the required minimum cash reserves of 5.25 percent.

In May, Foreign exchange reserves declined by about 80 million dollars as the Central Bank moved to support the weakening shilling.

Under the same period, CBK’s data showed the reserves fell from 9.14 billion dollars, an equivalent of 6.17 months of import cover, to 9.06 billion dollars,representing 6.11 months of import cover.

In September, CBK data showed the status of import cover and foreign exchange reserves in its capital account. The reserves stood at Sh859.67 billion as at September 20 with import cover holding on at 5.6 months compared to a previous average of 5.76 months.

Forex reserve, money held in terms of foreign currencies or assets which is meant to cushion the economy in paying liabilities if need be, has been averaging between $4.5 billion in the period between 1995 to 2018 recording a high of $12.2 billion in July, 2018.

The decline does not bear a bad effect however, it lowers foreign investments and increases the risk of a country losing the amount of foreign reserves held by its central bank.