Kenya’s Forex Reserve Fall from $7.95 billion to $7.85 billion

Remittances in Kenya are the biggest source of foreign exchange, ahead of tourism, tea, coffee, and horticulture exports.

Kenya’s foreign exchange reserves fell by $7.95 billion to $7.85 billion in the week to December 11, mainly on account of a depreciating currency, Central Bank data showed on Saturday.

CBK Weekly Bulletin data showed that the shilling weakened against major international and regional currencies during the week.  Against the dollar, the shilling fell to an average of KSh111.29, down from KSh110.17 in the previous week.

As a result, during the week, the central bank mopped up Ksh 39.0 billion in excess liquidity, albeit lower than the targeted Ksh 75 billion.

“Liquidity conditions are expected to remain thin, potentially sustaining the overnight rate above 5.0% by year-end,” NCBA Research says adding that “The pressure may persist as the government steps borrowing. At the same time, bank liabilities that greatly benefitted from the tax relief measures by the national government may also see reduced flows from this source.”

NCBA is also of the view that tighter liquidity will constrain demand for public debt, sustaining the upward pressure on yields. 

“This may, however, be gradual given the deliberate efforts to contain interest rates and ensure credit remains affordable.”

In November, the shilling recorded depreciated by nearly 4% in spite of an improving current account position, steady diaspora remittances, sound FX reserves and a globally weak US dollar.