Kenya could start using the Chinese Yuan as a reserve currency according to central bank governor Dr Patrick Njoroge.
The Central Bank of Kenya (CBK) said Kenya is among African countries thinking about “including the renminbi as part of their foreign exchange reserves.”
“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,” said Dr Njoroge during the Guangzhou-Foshan Nairobi Business forum adding that China’s role in the world’s economy has made the Yuan a suitable currency of foreign trade.
In addition, the CBK governor observed that the growing trade ties between Kenya and China make the Yuan an attractive reserve currency.
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“This has increased the demand for the Chinese Yuan by both Kenya and Chinese traders operating in Kenya,” he said.
Recently, central banks from Eastern and Southern Africa met in Harare to discuss the possibility of using the Yuan as a reserve currency.
“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 in renminbi (Chinese Yuan),”saidMEFMI spokesperson Gladys Siwela-Jadagu.
The CBK governor also said using the renminbi as a reserve currency will decrease the cost of trade transactions between China and Kenya and positively impact the Kenyan economy.
The International Monetary Fund (IMF) in 2016 included the renminbi to its Special Drawing Right (SDR) basket together with the US dollar, the British pound, the Euro, and the Yen.