Kenya's forex reserves decline due to foreign debt repayments, particularly to China
Jul 23, 2024
Nairobi [Kenya], July 23 : Kenya's foreign exchange reserves have experienced a significant drop of USD 487 million (about KES 63.9 billion) over the past week, following substantial repayments of external debt.
An English-language daily business newspaper published in Kenya, Business Daily, reported that this decline has reduced the resources critical for supporting the local currency.
The decrease in reserves follows the government's repayment of USD 533 million (about KES 70 billion) in external loans, which includes USD 433 million (KES 56.8 billion) used to service a loan from China.
This loan financed the construction of the Standard Gauge Railway.
According to the Central Bank of Kenya's (CBK) latest weekly bulletin, the forex reserves fell to USD 7.409 billion on July 18 from USD 7.896 billion on July 11.
This reduction has decreased the import cover from 4.1 months to 3.9 months. Import cover refers to the number of months the available foreign exchange reserves can finance imports.
In the 2014-15 fiscal year, Kenya borrowed USD 5.08 billion (KES 667 billion) for the Mombasa-Naivasha railway project. Following recent repayments, the Kenyan currency, which was trading at KES 163 per dollar earlier this year, has weakened to KES 131 per dollar.
The Business Daily's previous report indicated that Kenya had spent KES 152.69 billion (approximately USD 1.15 billion) repaying China in the last fiscal year.
This included USD 705.05 million (KES 100.47 billion) in principal repayment and USD 366.46 million (KES 52.22 billion) in interest. Additionally, Kenya paid USD 286.04 million (KES 40.76 billion) more than initially planned for the fiscal year.
The secretive nature of Beijing's loan terms with developing countries like Kenya often means borrowers must prioritise repayments to China, placing a considerable burden on the Kenyan public.
