CBK to Cushion Kenya's Economy by Buying 400 Million Dollars

The Central Bank of Kenya (CBK) is finetuning plans to acquire USD400 million to boost its foreign currency reserves amid World Bank’s projection that the effects of the spread of the COVID-19 Virus are set to shave off 5% off the world’s economic growth this year.

In a letter to all CEOs of banks in Kenya, the monetary policy regulating institution has asked interested lenders to submit their bids.

Under the plan, BK is set to acquire USD100 million (Ksh10.2 billion) once every month between March and June.

“This will bolster CBK’s preparedness to deal with the heightened global volatility and uncertainties,” said CBK’s Financial Markets Director William Nyagaka “Nevertheless, these purchases will be conducted while ensuring that they don’t introduce volatility and instabilities in the foreign exchange market,”

CBK’s weekly bulletin for the week ending February 28 shows that usable forex reserves were sufficient at USD 8,409 million as of February 27 from USD 8,500 as of January 30.

The bulletin also shows that remittance inflows ticked up to USD 259.4 million in January 2020 from USD 250.3 million in December 2019.

The cumulative inflows in the 12-months to January 2020 increased to USD 2,811 million against USD 2,733 million in 2019, reflecting a growth of 2.8%.

The decision to boost forex reserves could also be attributable to attempts to cushion the economy after a period of servicing colossal amounts of external debt.

Payment of external loans have left Kenya in a precarious position with Kenya needing more commercial debt as concessional loans are unable to cover forex reserves shortfalls because they are channeled into specific projects directly.

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