CBK clashes with Gachagua over remarks on currency shortage

CBK reveals billions Kenya holds in foreign exchange reserves after DP Rigathi Gachagua said that the government did not have enough money to satisfy Kenya’s oil demand.

Deputy President Rigathi Gachagua speaks during an interview with Citizen TV on Sunday, October 2, 2022

The Central Bank of Kenya has refuted claims from Deputy President Rigathi Gachagua, who said that the government did not have enough foreign exchange reserves to satisfy Kenya’s oil demand.

Gachagua made the remarks during an interview with Citizen TV on Sunday, October 2, 2022.

The deputy president claimed that as of Saturday, October 1, the CBK lacked sufficient foreign exchange reserves to facilitate the importation of oil, a claim to which the Central Bank objected.

The Central Bank of Kenya (CBK) notes the comments by the Deputy President, His Excellency Rigathi Gachagua, in an interview on Citizen Television on October 2, 2022. CBK would like to provide the correct position regarding where oil importers obtain the requisite foreign exchange and the adequacy of CBK's foreign exchange cover,” the bank said in a statement released after the interview.

The CBK explained that it solely manages the government's foreign financial commitments, not those of commercial oil importers.

First, following the complete liberalization of the foreign exchange market in the 1990s, all foreign exchange for private transactions is obtained from commercial banks.

CBK does not supply foreign exchange for transactions other than for the National Government (i.e, the government's imports or debt service payments) or CBK's operations. Oil importers, therefore, obtain their requisite foreign exchange from the commercial banks and not CBK,” the document read in part.

The Central Bank also assured the country that its foreign reserves were within the required threshold and that there was no cause for alarm.

According to the Central Bank of Kenya Act (Section 26), the CBK is required to maintain a reserve of external assets at an aggregate amount of not less than the value of four months’ imports as recorded and averaged for the last three preceding years.

As of September 26, Kenya’s foreign reserves stood at 4.64 months of imports.

CBK also said it monitors its usable foreign exchange reserves, which stood at $7.4 billion (Sh894 billion) as of September 29, 2022.

The CBK foreign exchange reserves, therefore, continue to provide adequate cover and a buffer against shocks in the foreign exchange market,” the statement concluded.

It is a common practice in countries around the world for a central bank to hold a significant amount of reserves in its foreign exchange. Most of these reserves are held in the US dollar because it is the most traded currency in the world.

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