Tag Archives: inflation

Understanding Kenya’s Currency Strength: Factors and Risks

Posted on by

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?


Building Fiscal Buffers: Strategies for Economic Stability

Posted on by

The outcomes of economic reform efforts depend heavily on the ability to manage fiscal risks effectively. One potential path to success is the stabilization of national debt through renegotiation and prudent fiscal management. Drawing from global best practices, a key strategy is to build fiscal buffers—reserves that can cushion the economy against future shocks. By setting aside funds during periods of economic stability, nations can better manage external crises without resorting to unsustainable borrowing. Additionally, diversifying revenue streams and improving tax collection efficiency can reduce reliance on debt while boosting domestic resources.

2 Minute Economics Report

To mitigate risks from the financial sector, stronger regulatory oversight is essential. Insights from international fiscal strategies suggest that adopting a risk-based approach to financial supervision—focusing on systemically important institutions—can help manage vulnerabilities. Ensuring that banks and financial institutions maintain robust capital reserves can safeguard the economy from financial instability that might arise from exposure to public debt. This approach emphasizes prevention and resilience, reducing the likelihood of fiscal shocks originating from the financial sector.

In terms of international partnerships, promoting public-private partnerships (PPPs) offers a pathway to attracting foreign investment while maintaining control over national assets. Transparent PPP frameworks that involve local stakeholders can increase the legitimacy of large infrastructure projects and ensure that benefits are widely shared. Structured renegotiation clauses in international deals allow nations to retain strategic control over critical infrastructure, minimizing risks of foreign overreach. A clear communication strategy that explains the long-term benefits of such projects can also help manage public expectations and build political consensus. For emerging economies, these strategies provide a balanced approach to navigating fiscal and economic challenges in a globalized world.

References:

Nairobi Leo How Cancelling Adani Deal Unprocedurally Will Hurt Kenya – CS John Mbadi

The Star JKIA-Adani project is in negotiation phase, says CS Mbadi

The Kenyan Wall Street CS Mbadi Seeks Public Views on Kenya’s Economic Situation

How to survive inflation

Posted on by

It is almost impossible to live without purchasing products and services especially in urban areas, for this reason, expenses are already high. Inflation makes it worse and therefore one needs a few tips on how to live comfortably as well as save money and mostly survive inflation.

First, the most important thing is to monitor the prices of goods in the market. When there is a slight drop is the best time to shop in bulk. Shopping in bulk also saves money and resources as compared to constant trips to the supermarket all month long. Bulk shopping is also cheaper as the packs are more economical. Also, consumers should try and purchase goods from the wholesalers if possible as the chain of distribution is shortened, since there are less middlemen and hence prices are cheaper. That way, one can save a few shillings. Scrutinize your shopping list comprehensively by asking yourself if you really need some of the things you are spending for and how often you use them. If the answer is negative, then do not purchase the items. By this, you will find yourself cutting off unnecessary expenses and saving some for the basic needs. Reduce your consumption on the products that are rising rapidly in price, especially if they are things you can do without. For instance, the price of fuel is rising rapidly. If travelling for a long distance, one can opt to use public means, which is cheaper than fueling your own vehicle that will save you a great deal of money.

Finally, inflation is beyond our control as consumers. There is nothing much we can do about it, but the good news is that we can control how much damage it brings along financially by basically cutting down on the products and services that we do not need temporarily, or reducing how much we utilize them. This will help you save a coin or two, that can be used to buy the necessities. Therefore one does not have to live cheap but just a bit smart. Let the luxuries be a once in a while treat. Consumers should also keep in mind that purchasing commodities in bulk is usually cheaper than the opposite. Good luck as you masquerade past the economic hurricane.