The Central Bank of Kenya’s weekly bulletin shows that forex reserves fell by Kes 28 billion in the week ended September 2 to $7.37 billion (Kes 884 billion) from $7.6 billion (Kes 912 billion) the previous week.
”The usable foreign exchange reserves remained adequate at 4.2 months of import cover. This meets the CBK’s statutory requirement to endeavor to maintain at least four months of import cover,” CBK said.
Nonetheless, the country violates East Africa’s Forex reserves policy, which requires members to have at least 4.5 months of import cover at all times. Kenya’s foreign exchange reserves have fallen below the regional benchmark for the third week in a row.
The last time the forex reserves were at this level was in October 2017, underlining the pressure on the Central Bank to shore up the forex reserves amid the shilling’s decline and increased demand for dollars by importers.
The east African country’s foreign exchange reserves have been declining in recent weeks as the central bank uses some of its reserves to keep the shilling from falling to levels that could disrupt financial markets.
Due to high inflation in developed countries, the country’s diaspora remittances, the country’s largest contributor to FX reserves, have fallen in recent months.
In July, the amount of money sent home by Kenyans working abroad fell for the sixth month in a row.
According to CBK data, diaspora remittances to Kenya totaled $319.4 million (Kes 38 billion) last month, a 5.1% decrease from $336.7 million (Kes 40 billion) in July last year.
The July inflows are the lowest since June of last year when the country received $306 million.
This was nearly Kes 1 billion less than the $326.1 (Kes 38.9 billion) sent in June and Kes 2 billion less than the Kes 38.9 billion sent in May.
The shilling fell to an all-time low of 120.05 against the dollar this week, down from an average of 119.72 the previous week.
Since the start of the year, the Kenyan shilling has fallen about 6% against the US dollar, as global crises such as the Russia-Ukraine conflict have disrupted major exports such as tea and horticulture, reducing inflows.