The Central Bank of Kenya (CBK) said Thursday the country’s foreign currency reserves hit US$7.4 billion dollars, almost five months of import cover in the last three weeks following the receipt of proceeds from the country’s first ever Eurobond issue.
“The current level of import cover is the largest that the CBK has ever attained,” the bank said in a statement, warning it was in an effective position to intervene in the local economy.
Its statement came after the local currency, the shilling, slid drastically to a near three-year low against the US dollar and other major currencies, sparking fears of sharp price increases.
The shilling firmed up at the trading counters Thursday after the CBK warning that it had the reserves to intervene in a market that it often left at the mercy of market forces.
The local unit traded at 88.90/89.00 to the US dollar, recovering from the steep slide of 89.45/89.55, which it last hit at the end of 2011, fuelling speculation the proceeds of the Eurobond were not remitted.
CBK said it received the proceeds of the Eurobond, which have so far boosted the foreign currency reserves from US$6.3 billion, equal to 4.13 months of import cover to US$7.4 billion.
“It is therefore clear that at the current level, foreign exchange reserves are not only adequate to meet any unforeseen market development but also confirms that inflows into the foreign exchange market have continued,” the bank said.
Traders cited low returns from the main export earners and the high demand from importers for hard currencies.
CBK said its level of reserves gave it the muscle to cushion the economy and to be in a position to weather any shocks that may affect the economy.
Kenya, which received an over-subscription for its Eurobond issue, said it cashed US$1.1 billion from the Bond issue three weeks ago.