Tag Archives: Economy

The Algorithm and the Republic — Kenya’s Reckoning with AI Governance

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When a private company’s neural nets began to unmask the hidden flows inside M-Pesa, the discovery jolted more than the fintech sector — it forced Kenya to confront a systemic question: who watches the watchers, and on what rules? The rollout of AI-driven compliance tools at Safaricom was never merely a tech upgrade; it arrived as part of a national emergency — a response to international pressure, spiralling fraud, and regulatory failure. The Financial Action Task Force’s increased-monitoring designation and months of global scrutiny had already pushed lawmakers and regulators into a sprint of reforms; industry actors answered with models that could learn patterns humans could not. But those same models required data — vast, granular, and often personal — and the legal scaffolding for such access was changing in real time. Kenya’s recent cyber-law overhaul and parliamentary amendments to the Computer Misuse and Cybercrime Act expanded state powers over online infrastructure, tightened penalties for SIM-swap and phishing offences, and gave the National Computer and Cybercrimes Coordination Committee sweeping directive authority over platforms and applications. Those moves addressed real harms — SIM swap fraud, phishing, and mass laundering — but they also recalibrated the balance between surveillance and rights.

Video Courtesy: The Kenyan Wall Street Youtube Channel

That recalibration is tested in the day-to-day rub of enforcement. Regulators and the ODPC have begun to draw lines: the Data Protection Commissioner’s recent ruling against a major betting operator for excessive data demands underscores the point that AML objectives cannot be a carte blanche for limitless intrusion. In the Betika case the ODPC found the company’s demand for three months of a user’s M-Pesa statements at account-closure to be disproportionate and ordered compensation, signalling that data-minimisation and privacy remain legally enforceable even amid AML pressures. At the same time, FATF’s 2025 monitoring guidance — and independent analysis from ISS Africa — make plain that Kenya must also show measurable results in prosecutions, beneficial-ownership transparency, and risk-based supervision of non-financial entities (including gambling and virtual assets) if it is to repair global confidence. The practical implication is blunt: Kenya cannot satisfy international partners by papering laws alone; enforcement and proportionate procedural safeguards must accompany technical surveillance. Otherwise the country risks swapping one reputational problem (grey-listing) for another — a domestic legitimacy crisis born of heavy-handed data practices.

So where does Kenya go from here? The answer lies in design choices — legal, technical, and institutional — that make accountability a feature, not an afterthought. We recommend three urgent, interlocking reforms that turn the AI question into a governance opportunity: (1) Purpose-bound, time-limited data access. AML or security queries should be scoped narrowly and logged; full transaction histories must not be a default feed into private models. (2) Explainability + redress. Any automated decision that materially affects a person (account freezes, cash-outs blocked, KYC escalations) must carry a succinct, non-technical rationale and a fast appeals channel routed through an independent body. (3) Joint independent oversight. Operationalize a statutory ODPC–FRC technical review board with public reporting obligations, the power to audit both models and data requests, and a mandate to publish redaction and retention metrics. These are not frictionless reforms — they will slow some processes and impose costs — but that trade-off is precisely the point: legitimacy costs less than lost trust. If Kenya stitches these protections into law and practice — and couples them with meaningful prosecution of financial crimes and improved beneficial-ownership registers — it can convert the awkward moment of global scrutiny into a first-mover advantage: an African model of rights-based, explainable AI governance for financial systems. The choices made now will decide whether Kenya’s algorithms become instruments of accountability or mechanisms that hollow out public trust.

References:

Business Daily Security or surveillance? How amended cyber law could reshape Kenya’s online space

Daily Nation How AI can close trust gaps in Africa’s financial systems

The Kenyan Wall Street How Safaricom is Leveraging AI to Bolster M-Pesa Security and Efficiency

Business Daily What FATF grey-listing means for Kenya

Privacy vs. Security — Kenya’s New Surveillance Dilemma

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Kenya’s abrupt pivot to algorithmic oversight has exposed a wrenching trade-off: the same machines that can trace illicit flows also watch citizens’ everyday lives. As Safaricom’s AI began mapping transaction behaviors and regulators demanded real-time feeds, private data that once moved only between users and platforms is now visible to a new ecosystem of state and corporate watchers. That visibility matters: behavioural scoring, timing analysis, and API logs can unmask syndicates — but they can also profile law-abiding users, freeze livelihoods, or expose sensitive patterns (medical payments, political donations, remittance partners). In practice, this tension has a name and a face: legitimate attempts to close laundering loopholes (especially in betting and mobile lending) have collided with privacy norms codified under Kenya’s Data Protection laws and enforced by the Data Protection Commissioner. The friction is no longer theoretical — it plays out in court rulings and public grievances, where an automated alert can instantly strand a small-business owner awaiting payroll, or a migrant worker trying to send school fees home.

One high-profile example is the case involving Betika, which was ordered to pay KSh 250,000 for breaching data privacy rules. The ruling found that Betika had improperly processed users’ personal data without sufficient protections or lawful grounds. This case highlights a critical danger: when betting platforms (already under AML scrutiny) become nodes of state data demand, weak privacy compliance means corporate actors — not just regulators — can overreach data collection and usage, compounding surveillance risk. The Betika ruling proved that courts are willing to hold fintech operators accountable, but the scale of risk grows when those same APIs feed into AI-driven compliance systems without clear limits or safeguards.

The policy question is therefore blunt: how do you operationalize intrusive yet effective AML tools without creating a surveillance grid that punishes innocents? The answer requires more than slogans. It begins with strict, purpose-limited access: authorities and private partners should get only the minimal data needed to investigate a flagged flow — not full transaction histories. It requires explainable AI, where users receive understandable notices about why their wallet was flagged, and a clear appeals process exists. It demands robust oversight: the ODPC and FRC must enforce audit protocols, redress mechanisms, and limits on data retention and use. The Betika precedent is a warning: tightening oversight without privacy guardrails risks turning compliance into exclusion and exposing digital citizens to data abuse. Kenya now stands at a critical juncture: Will it build a system where enforcement respects rights — or drift into a regime where surveillance becomes default, and trust becomes collateral damage? In our next post, we’ll explore how to build explainable AI and regulatory harmony — practical steps to reconcile compliance, innovation, and rights.

References:

iGamingToday Betika ordered to pay KSh 250,000 for breaching data privacy rules

Subex How AI and Analytics Are Revolutionizing Fraud Detection in Mobile Money

Thomson Reuters AML challenges in evolving threat landscape, says ACAMS report

Techcabal How Safaricom’s AI exposed money laundering in Kenya’s betting boom

Betting and Laundering — M-Pesa’s Hidden Battleground

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It began as a flicker of digital noise deep within Safaricom’s new artificial intelligence compliance system — a pattern so strange, even the engineers thought it was a software glitch. Betting wallets were trading in micro-loops, small deposits bouncing across networks at impossible speed, masquerading as gaming wins. But when the algorithm slowed the data stream, it exposed the truth: this wasn’t gambling; it was laundering. In days, Safaricom’s AI had flagged dozens of high-traffic betting APIs — among them Betika, Odibets, and MozzartBet — for suspicious activity, their systems pulsing with repeated micro-transactions that defied legitimate gaming behavior. What the model revealed was staggering. Ordinary player wallets had become conduits for billions of shillings, circulating under the guise of lucky streaks. Behind every spin, every small bet, was a meticulously choreographed web of digital cash-washing. The machine had finally confirmed what regulators long suspected but could not prove: Kenya’s fast-rising betting culture had evolved into the perfect laundromat — one hidden in plain sight inside the M-Pesa ecosystem.

The numbers told their own story. In the Kiambu Betting Ring case, investigators uncovered agents processing over KSh 40 million in just one month, using layered deposits and false payout slips to disguise dirty money as betting gains. Similar patterns appeared in the MozzartBet compliance freeze of mid-2024, where offshore cash-outs linked to unverified wallet owners triggered intervention by the Financial Reporting Centre (FRC) and Central Bank’s AML unit. By then, the data was irrefutable. AI modeling suggested that nearly 12 percent of Kenya’s annual betting volume — roughly KSh 160 billion — showed characteristics of laundering or structured fraud. The algorithms traced wallet behaviors that no manual audit could — bettors who “won” every day without ever placing bets, agents whose transaction volumes exceeded physical limits, and accounts that went dark after a single large payout. These were not random outliers; they were engineered identities, designed to game a system built for speed, not scrutiny. For years, M-Pesa’s success story — its promise of instant, borderless convenience — had inadvertently created the perfect storm: a seamless digital infrastructure exploited by syndicates more agile than the law itself.

Now, that same infrastructure is being weaponized against them. Safaricom’s AI partnership with the FRC has ushered in a new era of behavioral forensics — algorithms that don’t just track money but interpret motion, timing, and correlation. Yet this technological awakening has sparked backlash. Betting firms accuse Safaricom of overreach, freezing legitimate transactions and blurring the line between compliance and surveillance. Regulators, meanwhile, are tightening the screws: audit trails for all gaming wallets, mandatory KYC verification, and real-time data access for AML enforcement. The ripple effects extend far beyond gaming. Kenya’s digital economy now stands at an inflection point, where algorithmic oversight has become both protector and disruptor. In exposing how entertainment masked economic deceit, the AI has done more than flag fraudulent wallets — it has held up a mirror to the fragility of digital trust in a cashless nation. The house may always win, but in this new frontier, so does the machine — and its vision is only getting sharper.

References:

Techcabal Safaricom fires 113 employees over fraud as internal cases rise

KBC Channel 1 Kenya’s gambling industry set for shake-up after President Ruto signs into law Gambling Control Bill (Youtube)

The Kenyan Wall Street How Safaricom is Leveraging AI to Bolster M-Pesa Security and Efficiency

KBC M-pesa outage on Monday as Safaricom adopts AI to tame fraud

Understanding Kenya’s Investment Landscape Amid Fiscal Strain

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Kenya’s economy is presenting investors with one of its most complex puzzles yet: macroeconomic stability on the surface, undercut by a fiscal storm brewing beneath. Inflation stands at a steady 4.6%—comfortably within the Central Bank of Kenya’s target range—granting policymakers room for monetary easing. GDP data also reflects resilience, with Q2 2025 growth at 5.0%, led by agriculture and a robust services sector. Yet behind these encouraging numbers lies a sobering reality: fiscal dominance. With interest payments now consuming roughly a third of all tax revenue, the government’s borrowing appetite is crowding out private credit. Commercial banks, chasing high-yield government paper, have little incentive to lower lending rates for businesses, leaving private sector credit growth crippled at barely 3.3%, down from 13.9% just a year ago.

This squeeze is not just an abstract statistic; it defines the contours of Kenya’s medium-term investment landscape. The government projects a 5.3% full-year expansion, but global institutions remain unconvinced. The IMF and World Bank forecast growth at 4.8% and 4.5% respectively, citing weak private sector consumption, a sluggish credit channel, and a high risk of debt distress. Kenya’s fiscal constraints are now the single most powerful determinant of its economic trajectory, leaving the Central Bank’s rate cuts largely ineffective. The implication for investors is clear: headline GDP growth masks a structural imbalance where state borrowing sets the price of credit and private enterprise takes a back seat.

The balance of risk and opportunity lies in how investors position themselves. Kenya’s external buffers—rising remittances, strong agricultural exports, and narrowed current account deficit—are encouraging, but remain fragile, as all three are highly exposed to global downturns. For fixed income investors, short-duration government paper offers yield but carries sovereign risk that cannot be ignored. For equities, defensive plays in export-driven agribusiness, technology, and digital services stand out, while firms reliant on domestic mass-market credit may falter. Direct investment opportunities exist in renewable energy, climate-linked finance, and tech, sectors less tied to domestic fiscal strain. For corporate strategists, survival hinges on operational efficiency, alternative financing, and robust risk management to cushion external shocks. Kenya stands at a decisive juncture: without credible fiscal consolidation, its growth story risks becoming a cycle of constrained resilience. For investors, the key lies not just in reading the numbers, but in recognizing the limits of resilience when credit and capital are structurally captured by the state.

References:

KNBS Inflation Rate (CPI)

CNBC Africa Kenya’s inflation rises slightly in September on food, transport

World Bank Group Despite Improvements, Kenya’s Fiscal Path is Fragile Amid High Debt Vulnerabilities and Weak Revenue Growth

Audit vs. Austerity: The IMF’s Role in Kenya’s Recovery

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Kenya is on the edge of a pivotal financial reckoning. In the wake of the 2024 Finance Bill’s withdrawal and amid a battered economy, the International Monetary Fund (IMF) has demanded a sweeping corruption audit before any further disbursement of financial aid. At stake is more than KSh 100 billion in support tied to Kenya’s Extended Fund Facility, Extended Credit Facility, and Resilience and Sustainability Facility—aid that could help stabilize an economy reeling from debt, inflation, and political distractions. The collapse of the 2024 Finance Bill, triggered by nationwide protests over tax hikes, left a gaping fiscal hole. Now, the IMF wants answers before money moves. Between June 16 and 30, a Governance Diagnostic mission wrapped up in Nairobi. While Treasury insists the audit is not a precondition for funding, international observers say its findings will heavily influence future negotiations. The IMF has drawn a clear line: no serious anti-corruption reforms, no fresh credit.

IMF Demands corruption audit on Kenya

The Kenyan public feels the consequences every day. For ordinary wananchi, the stalled billions aren’t just digits on a spreadsheet—they represent hospital beds without medicine, classrooms without books, roads that end in dust, and a tax burden growing heavier on already strained shoulders. Years of unchecked corruption have gutted public institutions, forcing citizens to pay more for less while a well-connected elite evades accountability. The protests of June 2024 were not merely about a finance bill—they were about a social contract broken. Corruption doesn’t just steal money; it steals opportunity, trust, and dignity. It pushes more families below the poverty line and leaves critical sectors like education and healthcare in permanent crisis. Every act of embezzlement is a tax on hope. And now, Kenya must confront that cost head-on.

Yet as this economic standoff unfolds, the political class seems to be campaigning rather than governing. With two years until the 2027 general elections, the air is already thick with premature rallies and succession battles. This relentless politicking is not just tone-deaf—it undermines policy coherence and economic recovery. Critics argue that Kenya risks squandering a historic opportunity to reset its governance priorities. The IMF’s demand for a corruption audit is not just a bureaucratic checkbox; it is a test of political will. Whether the government embraces or evades the findings of the Governance Diagnostic will speak volumes. Kenya is at a crossroads. What lies ahead will depend on whether its leaders prioritize reform over rhetoric, the public over politics, and accountability over access to short-term cash. The world is watching. But more importantly, Kenyans are waiting.

References:

Mariblock Kenya fails IMF review, forfeits $850M disbursement

International Monetary Fund IMF Staff Completes Governance Diagnostic Mission to Kenya

Transparency International – Kenya Debate on Kenya’s economy must include a cure to the endemic corruption

The Standard Bitter IMF austerity pill return overshadows budget unveiling

The Standard Why IMF is demanding corruption audit on Kenya


Impact of U.S. Tariffs on Kenya’s Trade and Economy

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In a move that has dramatically altered Kenya’s trade dynamics with the United States, the Trump administration imposed a blanket 10% tariff on imports from most nations, including Kenya, effective April 2025. This action effectively nullified the longstanding preferential treatment Kenya enjoyed under the African Growth and Opportunity Act (AGOA), a Congressional framework set to expire in September 2025. The result has been a sharp contraction in Kenya’s export competitiveness, particularly in the apparel and agricultural sectors, which together accounted for a significant share of exports to the U.S. The Central Bank of Kenya (CBK) estimates the country could lose as much as USD 100 million annually in export revenue—a loss that represents over 13% of Kenya’s total exports to the U.S. The textiles and apparel industry, which employs tens of thousands in Export Processing Zones (EPZs), faces the steepest consequences, with squeezed margins threatening factory closures and mass layoffs. Compounding this is the complex global trade environment, where some of Kenya’s competitors face even steeper tariffs—suggesting a theoretical competitive edge—but domestic cost disadvantages like high energy prices and infrastructure bottlenecks could prevent Kenya from capitalizing on this.

A Report by Citizen TV Kenya

The introduction of the tariffs also triggered immediate market reactions, particularly on the Kenyan Shilling (KES), which depreciated upon the announcement, reflecting investor anxiety and a broader loss of confidence. While the KES had been strengthening in early 2025 due to improved foreign exchange reserves, tight monetary policy, and robust diaspora remittances, the tariffs introduced new downward pressures through trade disruption and a worsening current account balance. Analysts project a continued depreciation trend through 2025, with some forecasts suggesting the KES could reach as low as 155 to the dollar. Factors contributing to this outlook include high external debt servicing obligations, the CBK’s decision to pursue accommodative monetary policy—cutting rates to stimulate domestic demand—and narrowing interest rate differentials with the U.S., which could dampen investor appetite for KES-denominated assets. Although inflation is largely under control and remittances remain strong, these buffers may not fully offset the structural pressures introduced by disrupted trade flows and persistent macroeconomic imbalances. Moreover, Kenya’s exposure to external shocks remains high, and market sentiment continues to react swiftly to any signals of instability or shifts in U.S. policy.

A Report by NBC News

In response to these mounting pressures, the Kenyan government has adopted a multi-pronged strategy centered on diplomatic engagement, trade diversification, and internal economic reforms. Efforts are underway to secure a waiver from the 10% tariff through negotiations with U.S. officials, although progress remains uncertain. Simultaneously, Kenya is accelerating its participation in the African Continental Free Trade Area (AfCFTA), which offers a long-term avenue to diversify trade partnerships within Africa. However, AfCFTA implementation faces its own hurdles, including infrastructure gaps, non-tariff barriers, and complex rules of origin that limit short-term gains. Beyond the continent, Kenya is looking to strengthen trade ties with the European Union, with whom it signed an Economic Partnership Agreement in 2023, and explore new opportunities in Asia and the Middle East. On the domestic front, the government is considering measures to support affected sectors, including targeted incentives for exporters and investments in value addition. Nonetheless, these responses may take time to yield meaningful relief. With AGOA’s expiry nearing and no replacement framework yet secured, Kenya’s vulnerability to abrupt shifts in U.S. trade policy has been laid bare, reinforcing the urgent need to build a more resilient, diversified, and self-sufficient export economy.

References:

Capital Business Shilling falls amid uncertainty over US tariff hikes

Capital Business Kenya risks losing Sh14bn in exports to U.S. after 10pc tariff

The Star Kenya to diversity trade ties, push for more intra-Africa trade – CS Kinyanjui.

Serrari U.S. Hits Kenya with 10% Export Tariff Amid Shifting Global Trade Dynamics

The Standard Trump tariffs threaten Kenya’s Sh72b exports

All Africa Africa: How the New U.S. Tariffs Were Calculated and What They Mean for AGOA Trade Deal

EACOP Insights: Funding Strategies for Kenya’s Oil Sector

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In a significant stride for East African energy, Uganda’s ambitious East African Crude Oil Pipeline (EACOP) project has recently secured a crucial funding boost, signaling a move towards the realization of this multi-billion dollar infrastructure. This development offers a wealth of insights for neighboring Kenya, which also harbors considerable aspirations in the oil and gas sector. While Uganda’s EACOP has navigated a complex landscape of financing challenges and environmental concerns to reach this milestone, Kenya’s own oil development plans, particularly in the South Lokichar basin, have faced delays and the withdrawal of key investors. The contrasting progress underscores a valuable opportunity for Kenya to learn from Uganda’s experience, especially in securing the necessary financial backing and managing the intricate environmental and social considerations that come with large-scale energy projects. As Kenya seeks to tap into its hydrocarbon resources for economic growth, the strategies employed and the hurdles overcome by the EACOP project provide a compelling case study in the realities of the regional energy landscape.

A Report by EACOP (March 2025)

Several key lessons emerge for Kenya from Uganda’s journey. Securing funding in an era of increasing climate consciousness requires a diversified approach, potentially looking beyond traditional Western financial institutions to engage with regional banks and explore partnerships with entities that have different investment priorities. Furthermore, proactively addressing environmental and social concerns through transparent impact assessments, robust mitigation plans, and genuine community engagement is paramount to minimize opposition and enhance project bankability. Uganda’s experience highlights the critical need for a strong and consistent government commitment, coupled with a stable and predictable regulatory environment, to build investor confidence. For Kenya, this means streamlining regulatory processes, ensuring policy consistency, and prioritizing the implementation of stringent environmental standards and community-focused initiatives from the outset. Building strong and stable relationships with international oil companies, ensuring transparency in agreements, and investing in essential infrastructure are also crucial takeaways for Kenya as it navigates the complexities of developing its oil and gas sector.

However, Uganda’s EACOP project has not been without its challenges, facing significant environmental opposition and concerns about social displacement. These potential pitfalls offer further learning points for Kenya. Proactive engagement with environmental stakeholders, prioritizing fair compensation and resettlement plans for affected communities, and striving for maximum transparency in all aspects of the oil and gas sector are essential to avoid similar controversies. Kenya must also be mindful of the broader risks associated with resource extraction, such as the “resource curse,” and implement sound economic policies to ensure long-term sustainable development. By carefully analyzing Uganda’s experience – both its successes in securing funding and the controversies it has faced – Kenya can strategically refine its own approach to oil and gas development, aiming for a path that is both economically beneficial and environmentally and socially responsible, ultimately positioning itself as a stable and attractive player in the regional energy market.

References:

Reuters Uganda’s $5 billion EACOP pipeline gets funding boost

Monitor EACOP secures funding as Uganda eyes oil production next year 

Jijuze Kenya’s Oil and Gas Ambitions: Opportunities and Challenges

Pumps Africa Kenya to restart licensing of oil and gas blocks

UN Environment Programme Greasing the wheels of Kenya’s nascent oil and gas sector

Pipeline & Gas Journal EACOP Secures First Tranche of Funding for $5 Billion Uganda-Tanzania Pipeline

Kenya Ends $3.6 Billion IMF Loan: A Turning Point

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Kenya’s decision to mutually end its $3.6 billion loan arrangement with the International Monetary Fund (IMF) marks a significant shift in the nation’s approach to economic management, primarily driven by a confluence of unmet fiscal targets and mounting public discontent . The existing Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangement, while having disbursed a substantial $3.12 billion, faced a critical juncture with its ninth review, which ultimately was not pursued . The core issue stemmed from Kenya’s inability to meet specific fiscal obligations stipulated under the program, leading to the cancellation of a significant $850 million payment . This failure to adhere to the agreed-upon spending and revenue collection benchmarks highlighted the challenges President Ruto’s administration encountered in balancing the demands of fiscal discipline with the socio-political realities on the ground . Compounding these difficulties were the widespread public protests against the Finance Bill of 2024, a piece of legislation designed to boost government revenue in line with IMF recommendations but which proposed tax hikes on essential goods, triggering significant public outcry and ultimately its withdrawal . Despite this setback, Kenya has already initiated discussions with the IMF for a new loan agreement, indicating a continued recognition of the necessity for external financial support as the nation grapples with a considerable debt burden.  

A Report by NTV Kenya

The abrupt termination of the IMF program carries significant implications for Kenya’s already strained economic landscape, particularly concerning its high levels of debt and the stability of its financial markets . With a debt-to-GDP ratio exceeding sustainable thresholds and a substantial portion of government revenue already committed to debt servicing, the discontinuation of IMF funding introduces a potential funding gap that could further exacerbate these vulnerabilities . While the government has sought alternative financing through a loan from the UAE and the restructuring of Eurobonds, these measures may come with increased borrowing costs and potential foreign exchange risks . Experts also anticipate that the absence of the IMF program’s oversight could lead to renewed pressure on the Kenyan Shilling and the external sector, potentially impacting inflation and investor confidence . The IMF itself had previously assessed Kenya’s public debt as being at a high risk of distress, and the termination of the program could intensify these concerns, making future access to international capital markets more challenging and potentially increasing the long-term risk of default .  

Looking ahead, Kenya faces a period of economic uncertainty that will require careful navigation and strategic policy decisions . The government will likely need to implement further austerity measures, including budget cuts and enhanced domestic revenue collection, to compensate for the lost IMF funding and maintain fiscal credibility . The success of these measures, coupled with the ongoing negotiations for a new IMF loan agreement targeted for finalization by November 2025, will be crucial in determining Kenya’s economic trajectory . Building public trust and ensuring transparency in the implementation of fiscal reforms will be paramount, especially in light of the recent widespread protests against IMF-backed austerity measures . Ultimately, Kenya’s ability to achieve long-term economic stability and inclusive growth will depend on its commitment to fiscal discipline, equitable revenue mobilization, and sound governance practices in the absence of the previous IMF program.

References:

News Central Kenya Abandons Existing IMF Programme in Pursuit of New Loan Agreement

Further Africa Kenya and IMF Drop Loan Review and Move Toward New Financing Deal

Daba Finance Kenya Faces IMF Setback After $800M Review Falls Through

Aljazeera What do the IMF and foreign debt have to do with Kenya’s current crisis?

The Eastleigh Voice Gen Z anti-tax demos dented Kenya’s GDP growth prospect for 2025 – IMF

African Business IMF exit and eurobonds raise questions over Kenyan debt

































Understanding Kenya’s Currency Strength: Factors and Risks

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The Kenyan shilling has exhibited impressive resilience, marking a significant appreciation against major international currencies in recent years. In 2024 alone, the shilling surged by 17.4% against the US dollar, climbing from Ksh 160 per dollar in early 2024 to around Ksh 132 by the year’s end. This remarkable turnaround has been driven by improved foreign exchange reserves, which expanded by 28.2% to USD 9.3 billion, providing a 4.7-month import cover. Key drivers include a surge in diaspora remittances—totaling USD 5.2 billion in 2024—a thriving agricultural export sector, and a narrowing current account deficit supported by strategic trade policies. The currency has remained relatively stable in early 2025, with the exchange rate hovering around Ksh 128–130 per dollar, reinforcing investor confidence and bolstering Kenya’s economic standing.

A Report by the Monetary Policy Committee of the Central Bank of Kenya

A crucial factor in the shilling’s performance has been the Central Bank of Kenya’s (CBK) prudent monetary policies. In early 2025, CBK reduced the Central Bank Rate (CBR) by 50 basis points to 10.75%, aiming to stimulate economic activity while maintaining currency stability. Lower interest rates have enhanced market liquidity, making Kenyan assets more attractive to investors. Additionally, declining treasury bill rates—from an average of 17% in late 2024 to around 15.5% in early 2025—have eased pressure on borrowing costs while reinforcing confidence in local debt markets. Analysts attribute the shilling’s strength to these monetary adjustments, coupled with external factors such as reduced global oil prices and expectations of a new Eurobond issuance. However, concerns persist that the shilling’s appreciation could be overvalued, with some experts warning of potential corrections if CBK interventions ease or external economic conditions shift.

Despite the currency’s strength, several risks threaten its stability in the long run. Slowing economic growth, political uncertainty, and external shocks—such as fluctuating global commodity prices—could put pressure on the shilling. Kenya’s high external debt, exceeding USD 70 billion, remains a critical concern, with recent credit rating downgrades by Fitch and Moody’s raising alarms over the country’s fiscal health. Additionally, while forex reserves are currently robust, sustained stability will depend on Kenya’s ability to maintain strong export performance and remittance inflows. To preserve its gains, the government must prioritize fiscal discipline, economic diversification, and prudent debt management. By addressing these structural challenges, Kenya can ensure a resilient and stable currency, reinforcing its position as a key player in regional and global markets.

References:

CNBC Africa Kenyan shilling firms slightly, traders see more gains ahead

CEIC Kenya Exchange Rate against USD

Cytonn Kenya Currency and Interest Rates Review 2025

BNN Bloomberg Kenyan Shilling Strength Masks Underlying Risks to Economy

FRONTIER VIEW The Kenyan shilling will slowly lose value

CNBC Africa What’s behind the resurgence of the Kenyan shilling in 2024?


Transforming Kenya’s Tax System: Path to Sustainable Economic Growth

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Kenya’s economic trajectory has recently demonstrated remarkable resilience, particularly through the strengthening of the Kenyan shilling, a development largely attributed to the country’s evolving fiscal policies. The government’s strategic economic management, guided by a mix of tax reforms and regional trade initiatives, has played a crucial role in stabilizing the currency and bolstering investor confidence. A centerpiece of this approach is the National Tax Policy, designed to create a stable and predictable tax environment. By addressing inefficiencies within the tax system, policymakers aim to widen the tax base and attract more foreign investment, fostering a climate of economic predictability and long-term growth. These reforms align with the broader objectives of the Bottom-Up Economic Transformation Agenda (BETA), which seeks to lower the cost of living, generate employment, and enhance social security, positioning Kenya on a path toward sustainable economic development.

A Citizen Digital Report

Kenya’s tax system has undergone significant transformation since independence, evolving from a narrow and regressive structure into a more sophisticated framework incorporating income tax, excise duties, and customs levies. The landmark 1973 Income Tax Act has continuously been revised to match international best practices, ensuring that the country remains competitive in a globalized economic environment. More recently, the government introduced a Medium-Term Revenue Strategy aimed at broadening the tax base and ensuring fair taxation across various economic sectors. These administrative and policy-driven reforms are expected to enhance revenue collection, reducing reliance on external borrowing and strengthening national financial stability. Such fiscal discipline is essential not only for economic resilience but also for sustaining long-term development goals, as outlined in Kenya Vision 2030’s Fourth Medium-Term Plan (2023-2027).

Beyond domestic fiscal policies, Kenya has increasingly leveraged regional economic integration to bolster its financial standing. As a key player in the East African Community (EAC), Kenya has prioritized strengthening trade and investment ties within the region, reinforcing its role as an economic powerhouse. These regional partnerships have not only expanded market access for Kenyan businesses but also contributed to currency stability, as cross-border trade boosts foreign exchange reserves. By balancing domestic fiscal discipline with a proactive regional economic strategy, Kenya continues to enhance its economic resilience, demonstrating the potential of well-executed policy frameworks in navigating global financial uncertainties.

References:

MTP-IV-2023-2027

NATIONAL TAX POLICY

Center for Strategic & International Studies Kenya’s Economic Initiatives in the Democratic Republic of the Congo