(Nairobi) – Kenya’s foreign exchange reserves have grown by US$1.97 billion over the past ten weeks, reaching a total of US$9.323 billion. This is the highest level seen in the past three years and comes amid a period of stability for the Kenyan shilling.
In the past week alone, Kenya saw a record increase in its forex reserves, growing by US$737 million or 8.6%. This growth follows the approval of a US$606 million disbursement from the International Monetary Fund (IMF) under Kenya’s US$3.6 billion medium-term program, after months of delays. The surge in reserves has been attributed to an influx of dollars from banks, remittances, and exports, particularly agricultural products.
Currently, Kenya’s forex reserves are sufficient to cover 4.8 months of imports, exceeding the country’s statutory requirement of 4 months, as well as the East African Community’s (EAC) convergence requirement of 4.5 months. This provides a cushion for the economy, which has been vulnerable to fluctuations in global markets.
Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge attributed the rise in forex reserves to increased dollar inflows and the bank’s efforts to mitigate exchange rate volatility. “We have had a significant increase in foreign exchange, both from banks and diaspora remittances. In order to moderate the fluctuations and volatility in the exchange rate, we have indeed been buying forex,” Dr. Njoroge said during a post-MPC briefing in October.
At the same time, the Kenyan shilling has remained stable, consistently hovering around the KSh 129.19 to KSh 129.21 range against the US dollar for several weeks. This stability has been aided by the increased foreign currency inflows from agricultural exports, remittances from Kenyans abroad, and a growing tourism sector, particularly as the peak tourist season approaches.
In addition to the positive external factors, the CBK has also been working to limit excess liquidity in the market, further supporting the shilling’s stability. These combined efforts have helped avoid significant fluctuations in the exchange rate, contributing to a favorable economic environment.
Meanwhile, emerging market currencies have faced declines in the wake of Donald Trump’s victory in the US presidential elections. The US dollar saw its largest single-day gain since 2022, strengthening against several other currencies, including the Euro, South African Rand, Chinese Yuan, Japanese Yen, and Mexican Peso. The South African Rand, in particular, fell by 1.7%, while the Chinese Yuan dropped to a three-month low.
Although Trump has advocated for a weaker dollar, his policies—likely to drive inflation and economic growth—are expected to prompt the Federal Reserve to maintain higher interest rates, which could further boost the US dollar. This global dollar strengthening has put pressure on other currencies, but Kenya’s shilling has remained resilient due to the internal factors driving stability in the local market.