The shilling’s stability is supported by strong economic fundamentals

The Central Bank of Kenya (CBK) implements a flexible exchange rate regime, and intervenes occasionally to smooth excessive volatility that might disrupt market stability. This approach ensures that the exchange rate remains reflective of real economic conditions.

Some have questioned the shilling’s relatively narrow trading range, but stability within a flexible regime is not abnormal when underpinned by genuine economic factors. In recent months, foreign exchange inflows have strengthened, supported by robust remittances, strong export performance, and a rebound in the services sector.

Diaspora remittances rose by 5.9 percent to $2.52 billion in the first half of 2025, and continue to provide steady support to the current account.

Exports of tea, coffee, horticulture, and manufactured goods have remained strong, benefiting from improved logistics and diversified markets. Tourism has also rebounded, with receipts projected to grow to between Sh560 billion and Sh650 billion this year, up from Sh452 billion in 2024, a clear sign of renewed global confidence in Kenya.

Foreign exchange reserves remain healthy at about $12.1 billion (Sh1.56 trillion), providing over five months of import cover, and above the statutory minimum. The reserves have been sustained through a more balanced current account position and prudent external debt management.

The government-to-government (G-to-G) fuel import arrangement, concluded in 2023, has also contributed to easing short-term dollar pressures.

By allowing Kenya to import petroleum products on deferred payment terms, the arrangement has smoothed dollar demand over time and enhanced predictability in forex flows. Contrary to claims that it distorts the market, the framework has supported orderly trading conditions while ensuring a steady fuel supply at manageable costs.

It is important to note that the International Monetary Fund has not raised any concern with the Kenyan government regarding the exchange rate regime or the performance of the shilling. Kenya remains committed to a flexible, market-determined exchange rate system, anchored on transparency, credibility, and sound macroeconomic management.

While the shilling has remained steady against the US dollar, it has adjusted normally against other major currencies, particularly against the euro and the Sterling Pound.

This trend mirrors global currency movements and is consistent with developments in many emerging and frontier economies.

Kenya’s economy continues to demonstrate resilience. Growth is projected at around 5.0 percent in 2025, with a medium-term growth target of 7.0 percent under the Bottom-Up Economic Transformation Agenda.

A revitalised agricultural sector, a recovering manufacturing base, and strong service industries continue to drive this expansion. Inflation has moderated, investor confidence has strengthened, and fiscal discipline is being sustained.

Nonetheless, Kenya remains mindful of global financial conditions and commodity price shifts that may influence currency movements, and will continue to uphold prudent policies to safeguard stability and sustain investor confidence.

It is, therefore, not surprising that the shilling has held steady. Currency stability does not emerge by accident; it is the result of consistent, prudent, and transparent policy decisions. The fundamentals are aligned, markets are functioning, and confidence has returned.

The stability of the Kenya shilling should be read as evidence of economic resilience and policy credibility. As ongoing reforms take hold and external balances continue to improve, the shilling will remain an anchor of stability in Kenya’s economic transformation journey.

Mbadi is Cabinet Secretary, National Treasury