Kenya - 17 October - Kenya’s foreign exchange reserves have surged to an all-time high of US$12.07 billion, driven by fresh Eurobond inflows that have boosted the country’s external liquidity and strengthened the shilling, at least for now.
According to data from the Central Bank of Kenya (CBK), the reserves rose from about US$10.7 billion in early October to over US$12 billion within two weeks, marking one of the sharpest increases in a single month in recent history. The jump follows Kenya’s successful US$1.5 billion Eurobond issuance, which drew strong international demand.
A Welcome Boost for the Shilling
For months, the CBK had been under pressure to stabilize the shilling and maintain adequate import cover. Before the bond sale, the reserves hovered near the lower comfort threshold of four months’ import cover, as the country struggled with dollar shortages and rising import bills.
Following the Eurobond, the import cover now stands at roughly 5.3 months, comfortably above the CBK’s statutory minimum.
In a statement, the CBK said the increase “reflects inflows from recent external borrowing and strong remittance performance.”
Currency traders in Nairobi mentioned that the inflows eased short-term pressure on the shilling, which briefly strengthened against the dollar after the bond proceeds landed.
The Eurobond Factor: Relief With Strings Attached
The latest Eurobond, Kenya’s eighth since 2014, was issued in two tranches of seven and twelve years. Proceeds were earmarked for debt servicing and budget support, temporarily improving the CBK’s foreign position.
However, economists caution that while the reserves look healthier on paper, much of the boost is borrowed strength.
Dr. Wycliffe Mwangi, an economist at the University of Nairobi, argued thus,“This isn’t organic growth from exports or remittances, it’s debt. We’ve bought breathing room, not freedom.”
Reserves Rising Across 2025, A Trend of Fragile Recovery
Earlier in the year, Xinhua reported Kenya’s reserves at US$10.94 billion, already up from late 2024 levels thanks to remittance inflows and lower fuel import costs.
Analysts say this latest leap confirms a gradual rebound in the country’s external accounts, but one built on heavy external borrowing and fragile investor sentiment.
Local news stations recently noted that the CBK has even withheld dividends to the Treasury for the first time in seven years, an unusual move signaling a tightening liquidity environment and cautious reserve management.
Diversifying Reserves: Beyond the Dollar
Beyond bond inflows, Kenya is exploring new ways to safeguard its reserves.
According to Business Insider Africa, the government has entered talks with the Bank of England to increase its gold holdings, part of a diversification strategy meant to shield the economy from dollar volatility.
A Treasury source told Dawan that Kenya is considering allocating a portion of its reserves to “non-traditional assets” such as gold and regional currency swaps within the East African Community framework.
Economist Mercy Oduor explained the thinking: “Diversifying into gold or regional assets doesn’t replace the dollar, but it cushions Kenya from global shocks like rate hikes in the US. It’s about resilience, not replacement.
Why This Matters
The record-high reserves have injected a dose of optimism into Kenya’s financial outlook. For investors and credit-rating agencies, the surge signals short-term stability, proof that Nairobi can meet its upcoming debt obligations and service external loans on time.
It also gives the Central Bank of Kenya valuable breathing room to manage shilling volatility without resorting to steep interest-rate hikes that might choke growth. Yet, beneath the relief lies a sobering reality: every Eurobond inflow comes with a repayment clock.
Kenya’s external debt now stands above US$45 billion, and interest costs remain among the highest in Africa. Analysts warn that the newfound comfort could lull policymakers into complacency, even as the country’s current-account deficit hovers near 5 percent of GDP, a reminder that the reserves are a cushion, not a cure.
A Balancing Act
Economists agree that the record-high reserves are a welcome cushion, but also a reminder of the country’s dependence on external financing.
Dr Mwangi, who is a Senior Lecturer in Economics at the UoN maintains that “Kenya has learned to breathe with borrowed air".
"The real test will be keeping those lungs full when the debt repayment clock starts ticking,” Dr Mwangi.
For now, the record figure offers the CBK a short reprieve, but sustaining it will require stronger exports, disciplined spending, and perhaps a little luck in the global markets.
Kenya’s Reserves Hit Record US$12 Billion: But at What Cost?
Economists Argue the Boost is Borrowed Strength
