Kenya's Forex Reserves Face KSh 50b Dip Despite Increased Tourism, Diaspora Remittances

• The Central Bank of Kenya data shows that as of October 6, 2023, Kenya held usable reserves totalling $6.913 billion (KSh 1.083 trillion), which fell by KSh 50 billion in December
• CBK has reassured that the usable foreign exchange reserves remain adequate at $6.775 billion (KSh 1.06 trillion)
• Diaspora remittances have become Kenya’s largest foreign exchange earner, as well as tourism

Elijah Ntongai, a journalist at TUKO.co.ke, has more than three years of expertise in financial, business, and technology research, providing insights into both Kenyan and global economic trends.

Recent data from the Central Bank of Kenya (CBK) has shown that Kenya's foreign exchange (forex) reserves faced a notable decline of nearly KSh 50 billion in the final quarter of 2023.

As of October 6, 2023, CBK reported that Kenya held usable reserves totalling $6.913 billion (KSh 1.083 trillion).

However, according to the CBK bulletin released by the close of December 29, the reserves had diminished to $6.612 billion (KSh1.036 trillion), marking a significant decline of approximately KSh 50 billion during this period.

CBK has reassured that the usable foreign exchange reserves remain adequate at $6.775 billion (KSh 1.06 trillion) (3.6 months of import cover) as of January 4, meeting the CBK’s statutory requirement.

"This meets the CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover," read the January bulletin.

How Kenya earned from tourism and diaspora remittances

Despite the decline in reserves during the festive period, Kenya witnessed a strong recovery in the global tourism sector post-COVID, with tourist arrivals reaching 1.7 million by October 2023.

Diaspora remittances have become Kenya’s largest foreign exchange earner, prompting the government to leverage its citizens abroad for cheaper foreign-currency-denominated finance.

In line with this, President William Ruto announced plans to adopt a visa-free policy, replaced by Electronic Travel Authorization (ETA) starting January 2024, aiming to attract more visitors and revenues.

Effects of depreciating Kenyan shilling

Over the final quarter, the CBK bulletins for the final quarter show that the Kenyan shilling depreciated significantly, exchanging at KSh 156.09 per US dollar on December 28 compared to KSh 148.56 per US dollar on October 5.

Earlier on TUKO.co.ke, a recent report demonstrated that the Kenyan shilling experienced a notable depreciation against major international trading currencies during the third quarter (Q3) of 2023 compared to the corresponding quarter in 2022.

Notably, the Kenyan shilling lost against the South African Rand, Tanzania shilling, and Uganda shilling in Q3 of 2023.

Kenya's currency also ceded ground against prominent currencies such as the Euro, Pound Sterling, US Dollar, and Japanese Yen by 30.3%, 29.7%, 20.6%, and 15.3%, respectively.