The Kenyan Shilling has, over the previous weeks, proven notable resilience towards main worldwide currencies, buying and selling at Ksh129.28 to the US greenback as of Friday final week. This relative stability comes at a time when many rising market currencies are going through depreciation stress from a stronger US greenback and tightening international monetary circumstances.
One of the important thing drivers supporting the shilling is the sustained development in diaspora remittances. In May alone, in accordance with information from the Central Bank of Kenya (CBK), Kenyans overseas despatched residence Ksh56.93 billion (USD 440.1 million), pushing the cumulative 12-month whole to Ksh650.72 billion (USD 5.03 billion)—an 11.6 per cent improve from the identical interval final 12 months.
According to the CBK, these remittances are instrumental in bolstering the nation’s international change reserves and guaranteeing liquidity within the foreign exchange market.
The US stays the main supply of those remittances, contributing 57 per cent in May 2025. This regular influx of {dollars} not solely helps the present account place but in addition offsets among the pressures attributable to rising import prices, debt repayments, and investor capital flight in response to international uncertainty.
Kenya Shilling notes
Photo
African Business
In addition to remittances, Kenya’s export efficiency—significantly in key sectors like tea—continues to supply essential assist for the native foreign money. Tea stays one of many nation’s prime international change earners, and international tea costs have stayed comparatively agency regardless of provide disruptions in competing markets like Sri Lanka and India.
Increased demand from conventional patrons within the Middle East and Asia has additionally propped up earnings, regardless of the geopolitical tensions.
Another buffer for the shilling is the CBK’s administration of the nation’s international change reserves. As of June 19, Kenya’s usable reserves stood at Ksh 1.410 trillion (USD 10.91 billion), equal to 4.8 months of import cowl, comfortably above the statutory threshold of 4 months. This provides the central financial institution room to intervene out there if wanted, curbing extreme volatility.
The current oversubscription of presidency securities has additionally helped assist the shilling by attracting each native and international funding.
On June 18, the Treasury reopened 15-year and 30-year bonds, receiving Ksh101.4 billion in bids—greater than double the Ksh50 billion supplied. Strong investor urge for food for these long-term bonds is a sign of confidence within the nation’s fiscal administration and helps to stabilise the foreign money by rising greenback inflows.
The interbank market, which is a key indicator of liquidity circumstances, additionally displays a comparatively regular setting. The common interbank charge eased barely to 9.65 from 9.72 per cent the earlier week. Though liquidity stays tight—as evidenced by a drop within the quantity and quantity of transactions—the market has not proven indicators of panic or extreme pressure.
Globally, the US Federal Reserve and the Bank of England each held rates of interest regular amid lingering inflation considerations. The steady coverage stance helped keep away from any fast shocks to international capital flows, giving rising markets like Kenya some short-term reduction from exterior monetary stress.
Despite this, Kenya’s shilling has averted sharp depreciation because of a mix of sound financial coverage, strategic foreign exchange reserve administration, and robust inflows from remittances and exports. The CBK’s lively presence within the cash market, together with tight management over industrial banks’ extra reserves, has additionally helped forestall undue stress on the native unit.
Looking forward, the sustainability of this stability will rely upon a number of elements, together with international commodity costs, investor sentiment, and home financial efficiency. While the present fundamentals are holding up, a worsening within the international setting—resembling a spike in oil costs or aggressive US charge hikes—might possible set off renewed stress on the shilling.
Central Bank of Kenya Governor Kamau throughout an occasion organized by Kenya Bankers Association on October 16, 2024.
Kenya Bankers Association
