The Central Bank of Kenya (CBK) recently confirmed that Kenya is contemplating adopting the Chinese Yuan as a reserve currency. Dr Patrick Njoroge, the governor of the CBK confirmed this during the Guangzhou-Foshan Nairobi
Business forum.
This puts Kenya among the growing number of African nations that have been considering including the renminbi as part of their foreign exchange reserves. According to Dr Njoroge, this was inevitable as China has played a major role in the world economy making the Yuan a suitable currency of
foreign trade.
“It is inevitable that Kenya will include the Chinese yuan as a reserve currency. The only question is when and the timing will be determined by a number of short-term factors,” he said, adding that the increase in demand for the Chinese Yuan by both Kenya and Chinese traders in the country as a result of the growing trade ties between the two countries is yet another reason why the government was considering the move.
“The addition of the renminbi as a reserve currency will help reduce cost of transaction between China and Kenya as well as positively impact the Kenyan economy,”
he said.
The consideration has come in weeks after central banks and government officials from several countries in the eastern and southern region of Africa under the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) met in Zimbabwe to discuss the possibility of using the Yuan as a reserve currency.
The MEFMI is made up of countries such as Kenya, Uganda, Angola, Zimbabwe, Botswana, Burundi, Malawi, Lesotho, Namibia, Rwanda, Mozambique, Swaziland, Tanzania, and Zambia.
According to Gladys Siwela-Jadagu, spokesperson for MEFMI, most countries in the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) region have loans or grants from China and it would only make economic sense to repay it in renminbi.
In addition, the International Monetary Fund (IMF) in 2016 also included the renminbi to its Special Drawing Right (SDR) basket together with the US dollar, the British pound, the Euro, and the Yen, showing just how much the renminbi has become popular all over the world.
