CBK says Kenya has enough forex reserves amid El Nino, Middle East conflict

According to CBK Governor Kamau Thugge, Kenya's usable foreign exchange reserves currently provide about 6.2 months of import cover, well above the four-month minimum recommended level.

The assurance comes amid growing uncertainty over economic growth, with the ongoing conflict in the Middle East projected to have an adverse impact on certain sectors of the economy.

Kenya's reserve position has given the Central Bank sufficient buffer to meet the country's external payment obligations, including imports of essential goods, even as the Middle East conflict continues and adverse weather conditions threaten to disrupt local supplies and increase demand for imports.

Thugge said the Middle East conflict and weather-related shocks remain key risks to food production and economic activity, but maintained that Kenya has enough reserves to cushion the economy.

“Whether the conflict in the Middle East continues, we should have enough buffer to ensure that we don't have a disorderly adjustment in the exchange rate. Also, should the El Niño situation be very severe and require importation, we still would have enough foreign exchange buffer to address those needs,” Thugge stated.

According to the governor, despite a decline in diaspora remittances, the Central Bank's reserve position has remained above its target range.

He further said that despite elevated global uncertainties, the shilling has remained stable, supported by diversified foreign exchange inflows, confidence in the economy and adequate reserves.

“The foreign exchange reserves continued to increase. As of August 10, we had reached 15.2 billion, and this is equivalent to 6.3 months' worth of import cover. We endeavour to have a target of four months of import cover, so we have a big cushion between the four and 6.3,” Thugge stated.

Meanwhile, the Meteorological Department has warned that El Niño rains are expected to become significant from October 2026, with potential impacts continuing into early 2027.

The department has put the probability of strong El Niño rains at 81 percent, with a further 97 percent probability that the effects could persist into early 2027.

The expected weather conditions could disrupt agricultural production and local supplies, increasing pressure on imports and foreign exchange demand.