The Central Bank of Kenya(CBK) has said that its forex reserves remain adequate to smooth out any volatilities despite breaching the aggregate amount of not less than the value of four months’ imports.
During the post-Monetary Policy Committee (MPC) briefing, CBK Governor Patrick Njoroge said that the apex bank will still be able to perform its functions such as external government payments of debt, despite the breach.
Njoroge added that the CBK is doing its best to ensure that the reserves are back to the value of four months’ imports and that’s why they are not stressed.
CBK’s foreign exchange reserves currently stand at USD7,038 million (3.94 months of import cover). This is in breach of the Central Bank of Kenya Act (Section 26) which requires that CBK “at all times use its best endeavors to maintain a reserve of external assets at an aggregate amount of not less than the value of four months’ imports as recorded and averaged for the last three preceding years.
The reserves are also in breach of the EAC Monetary Union Protocol, where members to attain and maintain a reserve cover of 4.5 months of imports” calculated in line with the CBK Act.
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Njoroge said the CBK is doing its best endeavors even though they are slightly below the target. “You may be doing your best endeavors but occasionally, there may be moments when the number may be lower than the target,” he said.
Njoroge said that for CBK, best endeavors mean that they have looked forward and they expect some inflows. For instance, he noted that the country is expecting USD443 million (Sh54.1billion) from the International Monetary Fund(IMF) Fourth Review in December and this will buff up the country’s foreign exchange reserves.
He disclosed that Kenya is also expected to access a facility of USD400 million (Sh48.9billion) from the World bank by June 2023. “The programmed inflows give us comfort that we are doing our best endeavors,” he said.
Kenya’s reserves have been depleting partly because of debt repayments and CBK’s intervention to cushion the shilling’s depreciation against the dollar.
The currency has weakened about 8 per cent against the dollar this year. The local unit traded at 122.32 units to the US dollar on Thursday evening.
SOURCE: Capital business