CBK assures Kenyans of stable shilling as forex reserves expected to grow

The Central Bank of Kenya (CBK) has assured Kenyans that the country’s currency will remain stable as Kenya expects to receive more US dollars from recent government asset sales.

CBK Governor Kamau Thugge said the additional foreign currency inflows will strengthen the country’s foreign exchange reserves, helping protect the economy from both local and global economic shocks.

“We expect the exchange rate to remain relatively stable and for us to have reserves covering anywhere between 5.5 months to 6 months of import cover,” Thugge said.

He added that the reserves will provide enough support to deal with unexpected challenges such as adverse weather conditions or rising global tensions.

“I think that is sufficient for us to be able to address any of the domestic shocks, whether it’s the El Niño that may come in towards the end of the year or if the Middle East situation escalates beyond where we are now,” he said.

According to the CBK, Kenya’s foreign exchange reserves are expected to increase to about Sh2.1 trillion, equivalent to nearly $16 billion, once the government receives proceeds from the sale of its stake in Safaricom.

The increase is expected to raise the country’s import cover to about seven months, giving Kenya a stronger ability to meet its international payment obligations and maintain the stability of the Kenyan shilling.

Thugge said the stronger reserve position will also help cushion the economy against risks arising from ongoing geopolitical tensions, including the conflict in the Middle East.

“In short, we still expect a fairly strong balance of payments position this year, notwithstanding what is happening in the Middle East,” he said.

Foreign exchange reserves are held by the Central Bank to help pay for imports, service external debt and support the value of the Kenyan shilling during periods of market volatility. A higher level of reserves generally strengthens investor confidence and improves the country’s ability to withstand economic shocks.