Forex reserves enough to cushion shilling, says Central Bank of Kenya

By Winsley Masese

Kenya: The Central Bank of Kenya (CBK) has adequate foreign exchange reserves to cushion the shilling against temporary shocks that left the local currency weakened, Governor Njuguna Ndung’u has said.

Prof Ndung’u said the current level of foreign exchange reserves of $6.24 billion (Sh547 billion) is equivalent to 4.4 months of import covering, adding that the proceeds from the debut Eurobond will boost reserves.

The bond’s value is estimated at $2 billion (Sh174 billion). “The current foreign exchange reserves are sufficient to provide adequate cushion against temporary shocks,” Ndung’u said in a statement Monday. Prof Ndung’u blamed seasonal factors including payment of corporate dividends to foreign shareholders for the volatility.

Financial year

Majority of or all listed companies have announced dividend payouts for the 2013 financial year. Barclays Bank Kenya held an Annual General Meeting on Friday and Standard Chartered Bank the previous day, with all announcing dividends.

The shilling has been trading at two-and-a-half-year lows since late last week. Monday, the local unit traded at highs of 87.92 and lows of 87.74. On Friday last week, the local currency traded Sh87.8583 to the dollar, compared to the Sh87.533 recorded on Monday, the same week.

Monday, CBK also sought to mop up Sh3 billion of excess liquidity from the money markets using term auction deposits. CBK expects the situation to normalise as it continues to monitor developments in the market, adding that it stands ready to provide support to minimise the volatility.