Kenya’s forex reserves decline as shilling hits new low

Central Bank of Kenya (CBK) Governor Patrick Njoroge displays some of the new look shilling Kenyan currency notes on June 3, 2019 during a press conference at his office in Nairobi. - The unveiling of the new Kenyan bank notes has been greeted by some with disapproval, with Kenyans taking exception to the use of an image of a statue of the founding father Mzee Jomo Kenyatta printed on the notes. According to the 2010 Constitution of Kenya, notes and coins shall not bear the portrait of any individual. (Photo by SIMON MAINA / AFP) (Photo credit should read SIMON MAINA/AFP/Getty Images)

Kenya’s foreign exchange reserves fell 222 million U.S. dollars (25 billion shillings) this week as the Central Bank released dollars into the market to buttress the local currency, a report on the financial markets released Friday evening showed.

The Central Bank of Kenya (CBK) in the weekly update said the reserves fell from 9.09 billion dollars, an equivalent of 5.56 months of import cover, to 8.87 billion dollars, or 5.42 months of import cover.

During the period, the shilling hit its lowest level ever against the dollar, exchanging at 112.1, from 111.1 in the week ending November 12.

The local currency has been under pressure since the start of the month as dollar inflows from key exports like tea and horticulture fall amid high demand for foreign currencies for oil, machinery and capital equipment exports.

A weak shilling normally leads to costly imports as more units of the local currency are needed in the trading process.

The shilling similarly fell against the other major global currencies including the Pound Sterling and the Euro.

Despite the decline in dollar reserves, the apex bank, however, said the 8.87 billion dollars are adequate.

“This meets the CBK’s statutory requirement to endeavor to maintain at least four months of import cover, and the East Africa Community’s region’s convergence criteria of 4.5 months of import cover,” said the apex bank.