We have enough forex reserves, says Njoroge
Kenya has adequate foreign reserves to cover imports for the next four and a half months and defend the shilling against volatility, the government has said.
Addressing an American Chamber of Commerce meeting in Nairobi yesterday, CBK governor Patrick Njoroge dismissed fears the shilling will depreciate in the near future, saying the country has sufficient cover against short term shocks.
‘’The shilling has demonstrated unrivaled resilience, overcoming the bloated political environment experienced last year. It has been stable and the government is doing everything possible to enhance its strength,’’ said Njoroge.
He said Kenya Airways’ planned direct flights to USA, expected to start late October, will reduce freight costs of cut flowers by 50 per cent, bringing good returns for exporters.
Principal Secretary of Trade and Co-operatives Chris Kiptoo described trade relationship between Kenya and US as relatively balanced, saying USA and Britain jointly contribute 37 percent of Foreign Direct Investment , proof of their confidence in Kenya
Kenya imported goods worth $529.8 million (Sh54.6 billion) from USA between January to November last year compared to $428.2 million (Sh44.1 billion) exported to the world’s leading economy.
He asked US investors to take advantage of the upgraded infrastructure projects in the country to exploit opportunities especially in the continent’s virgin manufacturing sector.
According to the latest CBK weekly statistical bulletin, the country has a foreign reserve cover $7.04 billion (Sh725 billion). This is however the least reserve the country has had in the past 15 weeks. Kenya’s foreign reserve has been on a downward trend since October when it was at $7.4 billion (Sh762 billion).
Talks about depreciation of the shilling against the greenback gained momentum this week when a Barclays Africa report predicted the local currency will slide to Sh106 from the current Sh102.88 by the end of this year.
Barclays Africa chief economist Jeff Gable said political strain in Kenya and her neighbours coupled with various uncertainties in the global environment are the key factors likely to shake the stability of shilling.
“The shilling’s stability is not supported by fundamentals. Balance of trade, like in other Sub-Saharan Africa countries, is against Kenya. High imports, low exports, uncertainties in global politics and policies and surging global fuel prices will choke the shilling,’’ said Barclays Africa chief economist Jeff Gable.
Barclays Africa’s Macro Economic Report for Kenya and Africa further indicated the shilling is likely to depreciate further in 2019 to Sh108.50 and Sh110.80 in 2020 against the dollar. African Development Bank, Citi also expressed reservations on the shilling’s stability.