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Forex reserves hit record Sh1.3trn after investors snub new Eurobond
The Central Bank of Kenya in Nairobi. The expectation by some investors was that the CBK would yield to pressure and start accepting pricier bids in order to meet the expanded target. It did not.
Official foreign reserves held at the Central Bank of Kenya (CBK) hit an all-time high of $10.1 billion (Sh1.3 trillion) last week on excess cash left on the table after investors snubbed Kenya’s $900million (Sh116.4billion) Eurobond buyback offer a fortnight ago.
Data from the CBK shows the forex cover rose by $913 million (Sh118.1 billion) as of Thursday to cross the $10 billion mark for the first time, up from $9.1 billion (Sh1.2 trillion) a week earlier.
Last month, Kenya floated a new $1.5 billion (Sh194.2 billion) Eurobond whose proceeds were to be channelled towards buying back the $900 million, but investors agreed to sell back only 64.4 percent which translated to $579.6 million (Sh75.1 billion).
This left the country with a balance of Sh119.1 billion from the new Eurobond compared to the planned Sh77.5 billion after the buyback.
The amount is held at the CBK reserves and the Treasury says it will be used to settle syndicated loans within the month.
“From the proceeds of $1.5 billion (in the new Eurobond), a total of $593.3 million was settled (in the buyback). The balance is earmarked for repayment of syndicated commercial debts in the course of the month,” Bernard Ndung’u, the director-general for accounting services at the Treasury, told the Business Daily.
The buyback was aimed at easing the burden of paying the Sh116.4 billion in two years and extending the repayment to 2036 using the new Eurobond.
The current official reserves reflect 5.1 months of import cover, exceeding the CBK and the East African Community statutory requirements of maintaining at least four and 4.5 months of import cover, respectively.
The CBK reserves have previously come under pressure, particularly in 2023, as the apex bank was forced to sell dollars from the cover to maintain exchange rate volatility.
Reversal of exchange rate pressures starting in early 2024 has, however, allowed the CBK to rebuild the buffer by tapping increased inflows from foreigners buying into government domestic debt, rebounding exports, and growing diaspora remittances.
Inflows from Kenyans living and working abroad, for instance, grew 1.4 percent to $809.6 million (Sh104.8 billion) during the first two months of 2025, up from $798.3 million (Sh103.4 billion) remitted into Kenya during a similar period last year.
Foreign exchange reserves are held at the CBK as national assets and are used as a safety net to ensure the availability of foreign exchange to meet Kenya’s external obligations, including paying for imports and external debt service.
The reserves are also used to intervene when deemed necessary to smoothen ‘erratic’ movements of the exchange rates and the CBK external payments.
