Kenya’s forex reserves reached Sh$9.26 billion in the first week of June, strengthening the shilling value against the US dollar. It is reported that the local currency strengthened against regional and international currencies.
The Central Bank of Kenya said in a statement, “This meets the CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover.” It appears that interest demonstrated by international investors has strengthened the shilling value.
Yields from Kenya’s eurobonds reduced by an average of 21.4 basis points last week, media reports said. In fact, strengthening of the shilling is expected to ease inflation on import bills.
In May, World Bank approved a $1 billion loan to help Kenya bridge its budget deficit and tackle economic complexities as a result of the pandemic. The World Bank said in a statement, “Its approval is timely, since it will help fill the financing gap generated by the severe, ongoing shock to Kenya’s economy.”
It appears that budget deficit has increased to 8.2 percent of GDP in the financial year, media reports said. The increase in percentage is higher compared to the initial forecast of under 7 percent attributed to reduced tax collection and lost revenue from VAT and income tax cuts, media reports said.