Kenya’s official foreign reserves at the Central Bank of Kenya (CBK) have reached their peak in four years, thanks to recent allocations from the International Monetary Fund (IMF) and CBK’s tactical dollar purchases.
Based on CBK data, reserves rose by KSh95 billion to KSh1.204 trillion ($9.323 billion) as of last Thursday, compared to KSh1.109 trillion ($8.586 billion) the week before. This represents the peak point since October 2021, when reserves were at KSh1.210 trillion ($9.365 billion).
The increase in reserves is mainly due to IMF debt inflows and CBK’s proactive dollar purchases. These acquisitions were enabled by increased foreign investment in Kenya’s local government debt, driven by the nation’s appealing double-digit interest rates.
IMF Loan Increases Reserves
On October 30, 2024, the IMF granted approval for a disbursement of KSh78.3 billion ($606.1 million) to Kenya. The resources, associated with the seventh and eighth assessments of the IMF’s multi-year structural reform initiative, were deposited into CBK’s accounts as foreign reserves. These resources can also be utilized for providing loans to the government in local currency as required.
Besides the IMF inflows, the CBK’s tactical acquisition of dollars has strengthened the reserve buffer, securing the nation’s adherence to international standards.
Fulfilling Legal Obligations
With the increase, Kenya’s foreign reserves now meet the legal obligation of having a minimum of four months’ worth of import coverage. They additionally fulfill the convergence criteria of the East African Community (EAC), which mandate at least 4.5 months of import cover.
The foreign exchange reserves available for use stayed sufficient at 4.8 months’ worth of import coverage as of November 7. “The CBK mentioned last week that this fulfills its legal obligation to strive for a minimum of four months of import cover.”
The accumulation of this strategic reserve boosts Kenya’s ability to fulfill external commitments and reduce exchange rate fluctuations, highlighting the nation’s
