The full repayment of the $2billion Eurobond that was due in June has brought fresh optimism in the economy, despite ongoing political tensions.
This, as the country's official usable foreign exchange reserves held at the Central Bank of Kenya (CBK) jump to $7.896 billion (Sh1.02 trillion), as of last week, data by the apex bank shows.
This was a $121 million (Sh15.6 billion) increase from the $7.78 billion (Sh1 trillion) reported a week earlier.
The surge comes about a week after the country fully settled its 2 billion dollar Eurobond debt taken in 2014 using a loan from the World Bank.
Foreign exchange reserves make up national assets held as a safeguard by the CBK to ensure the availability of foreign exchange, to meet the country's external obligations including imports and external debt servicing.
“The usable foreign exchange reserves remained adequate at $7,896 million (4.1 months of import cover) as of July 12. This meets the CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover,” the regulator said in the weekly brief.
Kenya settled the balance, 72 billion shillings (about 558.16 million dollars) of the 2 billion Eurobond debt, before the June 24 deadline.
In February, Kenya had successfully raised 1.5 billion dollars in a Eurobond buyback offer as it sought to reduce the chance of defaulting on repayment.
Kenya cleared the remaining $556.97 million (Sh71.5billion) of the $2billion (Sh257billion) Eurobond that was due by June 24, 2024.
The outstanding note was settled on Friday, June 21, three days ahead of the maturity date.
The repayment has seen the country's forex reserves move above the four-month statutory requirement for the first time in five months.
This is the second week in a row in the post-Eurobond repayment, that reserves have maintained above the statutory requirement.
The current reserves meet the CBK’s statutory requirement of four months, albeit below the EAC’s convergence requirement of 4.5 months of import cover.
With the rise in the forex reserves, the apex bank can adequately support the shilling in case it faces pressure from international currencies.
The shilling has, however, remained stable against regional and global currencies, trading at an average of 128.68 last week to the dollar.
From late last year, spilling over to 2024, investors exhibited jittery concerns regarding Kenya’s debt sustainability.
This was however cooled down by the government’s move for the eurobond buyback in February in a bid to settle the maturing loan.
CBK Governor Kamau Thugge noted during the June 6 Monetary Policy Committee press brief, that there has been more supply of inflows mirroring a fairly stable shilling.
“We don’t see significant weakening or strengthening, there should be stability in the exchange rate,” he said.
Last week, CBK noted that liquidity in the money market remained adequate, supported by open market operations and government payments.
Commercial banks’ excess reserves stood at Sh18.4 billion in relation to the 4.25 percent cash reserves requirement (CRR).
The average interbank rate was 13.17 per cent compared to 13.30 per cent in the week ending July 4.
During the week, the average number of interbank deals increased to 47 from 36 in the previous week, while the average value traded increased to Sh29.6 billion from Sh24.2 billion in the previous week.