Kenya, Tanzania and Uganda have used more than $1.2 billion, so far, from their foreign currency reserves since the start of the year to cushion their falling currencies against the dollar.

The declining foreign currency reserves have also seen Kenya ask the International Monetary Fund for more time to settle its debt obligations. The weakening of capital inflows, central bank interventions in the foreign exchange market, and a decline in tourism receipts contributed to the depreciation of the Kenya shilling.

In its latest review of the country, IMF said the government has requested the debt waivers on the basis that its net international reserves have declined, making the country unable to draw money to settle its arrears.

Kenya delayed in paying its external debts for the 2014/15 financial year, to the tune of $64 million. It has since cleared this debt, signalling that the latest reprieve it seeks is for debts accumulated between March and August.

“The external arrears reported between July 2014 and March this year show capacity constraints at the National Treasury’s debt management office and interagency co-ordination problems rather than an underlying inability to service external debt,” the IMF said in a statement.

In an August 31 letter to the IMF, Kenya’s Treasury Cabinet Secretary Henry Rotich asked for a modification of both the end of September and December targets for net international reserves, net domestic assets, and the primary budget balance of the central government.

“With the exception of temporary delays in the repayment of some external obligations, which we have settled, we met all quantitative performance criteria and indicative targets under the programme... we are therefore requesting waivers under both arrangements for this temporary non-observance,” Mr Rotich’s letter reads.

IMF deputy director and acting chair of the review team Min Zhu said that Kenya’s arrears were a result of co-ordination failure among government entities rather than an inability to pay.

“We are pleased that the authorities have adopted corrective measures by strengthening capacity at the National Treasury’s debt management office. We also feel that the introduction of the Treasury single account should be decisively implemented,” said Mr Zhu.

Kenya’s foreign reserves have declined to slightly below the statutory requirement of four months of import cover. As at the end of last week, the reserves stood at $6.18 billion, which is equivalent to 3.94 months of import cover.

By the end of August, the reserves were at $6.392 billion or 4.05 months of import cover, while in July, they stood at $7.43 billion or 4.85 months of import cover.

National Bureau of Statistics data shows that the balance of payments position worsened to a deficit of Ksh47 billion ($456 million) in the second quarter of the year from a surplus of Ksh166 billion ($1.6 billion) in the same quarter in 2014.

Kenya has so far spent $471.9 million of its foreign currency reserves trying to stabilise the shilling, while also spending $164.4 million towards interest payments on the $2.75 billion June 2014 sovereign bond. The country is expected to settle a total of $305.1 million in interest payments this year on its external debts from its reserves.

Uganda is also facing a foreign currency reserve crunch as it seeks to prop up its currency, but Bank of Uganda Deputy Governor Louis Kasekende is confident about the country’s level of foreign exchange reserves.

“The level of our foreign exchange reserves is $2.7 billion, which is equivalent to 4.2 months of future imports of goods and services. This is above the IMF recommended level of three months of import cover,” said Dr Kasekende.

The IMF requires central banks to have foreign exchange reserves that can cover three months of future imports of goods and services. Central banks in the region however have agreed to always have their reserves at above four months of import cover, which level Kenya is currently below.

READ: Central banks agree on forex reserve ratio

BoU has so far spent more than $300 million in cushioning its currency. As at end of August, its reserves stood at $2.79 billion, down from $3.04 billion. The reserves have shrunk by 11.14 per cent to date.

Rwanda said that it has enough reserves to curb currency volatility and meet its financial obligations. The country said that as at the end of August, it had reserves worth 4.3 months of imports.

National Bank of Rwanda Governor John Rwangombwa said, “We are in discussions with the IMF to have a stabilising fund. However, we have enough reserves to protect us against any crisis and fight any volatility against the franc.”

The Bank of Tanzania’s monthly reports show that it has spent more than $532.1 million this year in trying to stabilise the Tanzanian shilling.

“The Bank of Tanzania participated in the market, selling $280.3 million in the second quarter of the year compared with $251.8 million in the first quarter, mostly for liquidity management,” the bank said in its latest quarterly report.

The county has also spent an additional $197.4 million in the two months after June from its reserves for currency stabilisation. The Tanzania shilling has fallen by more than 23 per cent against the dollar this year.