CBK Now Shopping For Dollars From Commercial Banks, To Use Ksh40 Billion

The Central Bank of Kenya (CBK) will use at least Ksh40.4 billion to buy dollars from commercial bank in a period of four months.

According to a letter addressed to all bank CEOs, CBK will use $100 million (Ksh.10.1 billion) on a monthly basis from March to June to buy the dollars, in a bid to boost its reserves above normal levels.

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

Read:  CBK Retains Lending Rate At 9 Percent For The Sixth Time In A Row

CBK says that the move has been informed by the developments around the world, including a significant drop in the global oil prices, opening up a window for a more formal dollar purchase program.

CBK’s usable foreign exchange reserves were reported at $8.409 billion (5.11 months of import cover) as of February 27.

“This meets the CBK’s statutory requirement to endeavor to maintain at least four months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover,” said CBK in the weekly bulletin.

Read:  CBK Governor Patrick Njoroge Lands UN Job

CBK had the highest of foreign currency reserves in May 2019 at Ksh1.4 trillion ($13.4 billion) in May of 2019 an equivalent 6.4 months import cover while at their lowest, the buffer sat a low Ksh90.7 billion ($897 million) in December of 2000.

Globally, China has the biggest reserve of foreign currency at Ksh323.5 trillion ($3.2 trillion) followed by Japan and Switzerland at Ksh131.4 trillion ($1.3 trillion) and Ksh85 trillion ($840.3 billion) respectively.