The Central Bank of Kenya has launched an aggressive dollar-purchase plan to cushion the shilling after the IMF failed to give an assurance over renewal of the suspended $1.5 billion standby credit facility.
A delegation of the International Monetary Fund failed to announce a renewal of the standby loan after concluding a visit to Nairobi on Wednesday.
“Discussions will continue in the coming period,” said the IMF statement indicating that there were unresolved differences with the government.
“Technical work will continue to firm up underpinnings of the plan, which could be supported by a Fund arrangement,” it concluded.
The three-year standby loan is intended to protect the Kenyan shilling against external shocks and raise the country’s credibility in the eyes of international lenders.
The Central Bank (CBK), on the same day that the IMF team concluded its mission in the country, issued a circular to all chief executives of commercial banks announcing that it would start buying US dollars from the lenders to boost its foreign exchange reserves. The regulator committed to buy up to $100 million each month from commercial banks, for a three-month period (March-June).
“The minimum amount for these purchases will be $1 million, and will be transacted at the prevailing market rate and at CBK’s discretion,” said William Nyagaka, the bank’s director, financial markets department.
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