By Duncan Miriri
NAIROBI (Reuters) -Kenya’s central bank expects scheduled hard currency inflows into its useable official reserves to kick in starting from next month, the governor of the bank said on Thursday.
The foreign exchange reserves held by the central bank slipped to 3.94 months worth of import cover, the bank said on Wednesday, below the four months level required by law.
“We are doing our best endeavours to ensure we get adequate reserves. This is why we are not stressed,” Patrick Njoroge told a news conference, citing a $440 million tranche expected next month from an IMF lending programme.
More funds would be coming from the World Bank, Njoroge said, without providing more details.
The pressure on the reserves was coming from the government’s debt repayments, he said.
The East African nation ramped up local and foreign borrowing in the last decade to fund the construction of infrastructure such as rail lines.
Like other emerging and frontier currencies, the Kenyan shilling has hit a series of record lows this year, mainly due to the strengthening of the dollar.
The central bank was comfortable with the shilling’s performance, Njoroge said, adding that it was down 8.0% this year so far, faring better than other African currencies such as the Ghanaian cedi.
The government will stick with its “flexible exchange rate” policy, he said, since it had served the country well as an automatic absorber of the external shocks since late last year.
Policymakers raised the benchmark lending rate by half a percentage point on Wednesday, the third hike this year, to stem persistent inflationary pressures.
Inflation jumped above the government’s preferred band of 2.5-7.5% in the second half of this year, but policymakers are optimistic that their tightening will arrest the momentum.
“Hopefully sometimes in the next quarter, early next year, we will see (inflation) outcomes back in the target band,” Njoroge said.
(Reporting by Duncan Miriri; Editing by Alex Richardson)
