Kenya forex reserves fall below 3-mths import cover

Mon Feb 9, 2009 3:26pm GMT

NAIROBI Feb 9 (Reuters) - Kenya's food crisis has forced east Africa's biggest economy to drain its hard currency reserves to less than three months' worth of import cover, Prime Minister Raila Odinga said on Monday.

"Our foreign exchange earnings are on a decline at a time when we must spend a large amount of foreign exchange for emergency imports of maize," he told a meeting with donors. "This development has forced us to draw down our official foreign exchange reserves to 2.8 months of import cover."

Last month, President Mwai Kibaki declared a national disaster over a food shortage that has left about 10 million Kenyans in need of food aid.

The government has aimed to maintain hard currency reserves equal to the cost of four months' imports. But Odinga said the development would not affect the Kenyan shilling currency KES=.

"Let me assure my fellow Kenyans and you that we will keep our foreign exchange market and the value of the Kenya shilling stable," he said.

The shilling lost ground against the dollar in the second half of last year due to a higher import bill as the country paid more for crude oil and raced to fill maize deficits caused by a post-election crisis at the start of 2008.

Violence then disrupted tourism, an important hard currency earner which brought in $1 billion in 2007. The shilling closed Monday's session at 79.20/30 against the dollar, a little stronger than the last session's close of 79.45/55. (Reporting by Duncan Miriri; Editing by David Stamp)




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