Nairobi — Kenya's foreign exchange reserves have declined in recent weeks, partly due to external debt service obligations, the Central Bank of Kenya said, even as it reassured markets that the country retains sufficient buffers to withstand short-term shocks.
The CBK has flagged rising external pressures on the economy, linking the recent dip in reserves to slowing remittance inflows and heightened geopolitical risks, even as it maintained that buffers remain adequate to shield the shilling.
Speaking during the Monetary Policy Committee (MPC) briefing, CBK Governor Kamau Thugge pointed to weakening diaspora inflows particularly from key markets as a growing concern for dollar liquidity.
"We expect maybe a slight deceleration, again, because of the direct impact on remittances from the Gulf area, where about 10% of our remittances come from, but there are also potentially indirect effects, arising from a slowdown in other countries, for example in the US," said Thugge.
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"So we are projecting a growth of remittances of only 1.4% this year."
The caution comes days after the CBK reported a Sh50 billion drop in reserves in its weekly bulletin, attributing the decline partly to the economic fallout from the Middle East conflict, alongside external payments including debt servicing. The pressure has fed into a marginal weakening of the shilling against the dollar.
Thugge said the external position is also being strained by a widening current account deficit, driven by higher import costs and softer inflows.
"The current account deficit for 2026 is projected at 3% of GDP... this is a reflection of the emerging risks of the conflict in the Middle East,higher oil prices, low receipts from services, slower growth in remittances, as well as slower growth in exports," he said.
Despite the headwinds, the CBK struck a reassuring tone on reserve adequacy. Gross reserves stood at $13.4 billion as of April 7, equivalent to about 5.7 months of import cover well above the statutory minimum of four months and the East African convergence threshold of 4.5 months.
The regulator argues that the buffer, alongside diversified foreign exchange inflows, has helped stabilize the currency even amid global uncertainty. The shilling has remained relatively steady in recent weeks, supported by improved market confidence and central bank interventions.
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