The Central Bank of Kenya building in Nairobi. PHOTO | DENNIS ONSONGO | NMG
The significant weakening of the shilling versus the dollar handed the Central Bank of Kenya (CBK) an unrealised exchange gain of Sh68 billion on its forex holdings in the year ended June 2022, helping double its surplus for the period to Sh76.9 billion.
The unrealised forex gain surged from Sh25.27 billion a year earlier, according to disclosures in the banking sector regulator’s latest annual report.
The CBK held $8.5 billion (Sh1.029 trillion) in official foreign exchange reserves by the end of June this year, the bulk of it in dollars.
The local unit on average depreciated by 3.7 percent against the greenback in the year to June 2022 to exchange at an average of 117.83 units—meaning that those with dollar holdings saw an increase in the shilling value of their hard currency.
Thanks to the higher forex revaluation, the CBK was able to raise its surplus from Sh36.9 billion in the year ended June 2021, pointing to the advantage that dollar holders enjoyed in the country in the period even as spenders such as importers suffered losses arising out of higher forex purchase costs.
The CBK’s actual or realised gains in the year, however, fell to Sh8.33 billion in the review period from Sh11.72 billion the year before, largely due to lower trading income due to fair value losses on financial assets.
The apex bank subsequently transferred Sh4 billion of the realised gains as dividends to the Government Consolidated Fund last month and used the balance to boost its paid-up capital from Sh35 billion to Sh38 billion.
“During the financial year ended 30 June 2022, the bank’s operating surplus was Sh8.33 billion (2021: Sh11.7 billion) due to lower rates offered on foreign deposit placements. An unrealised foreign exchange gain of Sh68.56 billion was recorded during the year (2021: Sh25.27 billion) due to the strengthening of the US dollar,” said the CBK in its annual report for the year ended June 2022.
The bank also recorded a fair value loss on fixed income securities of Sh21.61 billion (2021: loss of Sh6.32 billion) as a result of a decline in market prices.”
With the shilling weakening further since June to exchange at 121 units to the dollar on Tuesday, the CBK will be eyeing further revaluation gains this year, although falling volumes of reserves will dampen the gains. The private sector has also been eyeing the capital gains on offer from holding onto dollars in recent months, pushing their holdings of the greenback in local bank accounts to a record Sh905 billion equivalent by the end of July.
Other than the potential for capital gains, depositors have also held tightly to their dollars due to ongoing concerns about accessing forex in the market. Some manufacturers have complained of difficulties in getting forex from banks and having to pay higher than the official printed rate for dollars when they get them.
But the large dollar holdings point to forex market inefficiencies, with dealers telling the Business Daily that lenders have been unwilling to sell the greenback to each other, either out of concerns about the ability to replenish their stock, or fear of trading higher than the official rate and attracting regulatory scrutiny.
[email protected]

source