Why CBK is planning to purchase US dollars until June
Central Bank of Kenya (CBK) has rolled out plans to buy up to USD 100 million (Sh10.44 billion) every month from March to June 2020 to help boost its foreign exchange reserves.
According to William Nyagaka, director, Financial Market Department, CBK has commenced buying US dollars in order to progressively boost its Forex reserves above the normal levels.
Nyagaka said the minimum amount for these purchases will be US$ l million and will be transacted at the prevailing market rate and at CBK’s discretion. He urged commercial banks interested in conducting these transactions to CBK.
“The buying of US dollars would bolster CBK’s preparedness to deal with the heightened global volatility and uncertainties,” the statement said.
Nyagaka said CBK sees an opportunity for such purchases given the developments unfolding in the global markets and economy.
Nyagaka said sometimes when the prices shoot up, they reduce the existing Forex reserves – leaving very little that cannot withstand any external or internal shocks.
“For instance, in 2019, Kenya's petroleum product imports amounted to USD 3.3l0 million (Sh337.39 million) and the average price of our benchmark oil product was USD 66.5 per barrel,” Nyagaka said.
He said the benchmark price has now fallen to USD 5 (Sh511.20) per barrel, which portends significant savings. However, these purchases will be conducted while ensuring that they do not introduce volatility and instabilities in the foreign exchange market.
Nyagaka said CBK will looking to purchase from commercial banks up to USD I00 million each month from March to June 2020.