The Central Bank of Kenya (CBK) expects new dollar inflows from two development banks and diaspora remittances to ease pressure on the local currency within the next two months.
The local currency has been on a losing streak against the US dollar for the better part of the year due to debt servicing especially on the dollar denominated loans, a factor that has also depleted the country’s forex reserves.
“There has been a slight decline in our foreign exchange reserves and partly that reflects debt service payments,” said CBK Governor Dr Kamau Thugge during his post-Monetary Policy Committee media brief on Wednesday.
Kenya’s forex reserves has declined to $6.9 billion equivalent to 3.7 months of import cover which CBK said continues to provide adequate cover and a buffer against any short-term shocks in the foreign exchange market.
Nonetheless, CBK expects the local currency which has depreciated against the dollar since January this year, from an average of Ksh 123 in January to 148 in October to ease by December 2023 when new dollar inflows are expected from multilateral lenders.
“The financing we expect from our development partners within the next two months or so, all of this should combine to bring more stability to the forex exchange market,” he added.
The free fall of the local currency has also seen a decline in imports especially equipment and machinery and vehicles as importers struggle to acquire the costly dollar.
Dr Thugge also played down any intent for Kenya to refinance the $2 billion Eurobond whose interest payment is due in June next year.
“Currently the global credit market conditions are not favourable for refinancing the Eurobond. We have been engaging our lead managers and advisers on how to address the 2024 Eurobond. We have looked at several options and we are talking to multilateral institutions, with the World Bank and the IMF to see how much additional resources they can make available to us,” said Thugge.
According to CBK, Kenya will progressively reduce the liability of the Eurobond between now and June by building its reserves with funds from lenders to pay for the loan.