Why the Kenyan Shilling Has Remained Surprisingly Steady at Ksh 129/USD for Over a Year

The Numbers: A Year of Stability

Since around July 2023, the exchange rate has hovered consistently around Ksh 128–130/USD, with data from Pacific Forex Bureau, CBK, and XE.com all showing minor fluctuations within this narrow band.

CBK official rate as of August 2025:
Buy: Ksh 128.95
Sell: Ksh 129.10

For comparison, in the same period:

• Nigerian Naira devalued from 770 to over 1,400.

• Egyptian Pound depreciated from 30 to 49 per dollar.

• Ghanaian Cedi slipped from 10.5 to 14.2 per dollar.

So how has Kenya pulled off this feat?

1. Central Bank’s Reserves Strategy

The Central Bank of Kenya (CBK) has quietly built up foreign exchange reserves, which stood at USD 7.42 billion as of August 2025 — enough to cover 4.1 months of imports.

This buffer has given CBK room to intervene in the market whenever there’s too much pressure on the shilling. CBK has also taken steps to limit speculative attacks on the currency by:

• Increasing forex reporting transparency for commercial banks.

• Halting round-tripping and “phantom” forex demand.

 CBK Governor Kamau Thugge:

“We are managing the exchange rate carefully to avoid imported inflation and protect our economy from external shocks.”

2. Increased Forex Inflows

a) Diaspora Remittances:

Kenya has witnessed an all-time high in diaspora remittances. According to CBK:

• Kenyans abroad sent over USD 4.2 billion in 2024.

• The US, UK, Germany, and Saudi Arabia top the list of sending countries.

This consistent inflow of dollars has helped balance the forex market, easing pressure on demand for imports.

b) Eurobond Restructuring and New IMF Loans:

Kenya successfully restructured part of its 2024 Eurobond through a partial buyback and fresh IMF loan injection. This move reassured investors and added liquidity to the forex market.

3. A Recovery in Export Earnings

The shilling has also benefitted from better-than-expected performance in some key export sectors:

• Tea earnings increased by 12% year-on-year, thanks to favorable global prices.

• Horticulture and flower exports made a strong comeback post-COVID and EU market disruptions.

• Tourism earnings jumped 17% compared to 2023, according to the Ministry of Tourism.

These helped balance Kenya’s current account deficit, which dropped to 4.8% of GDP from over 6.4% the previous year.

 4. Import Controls and Fuel Deal

The government-to-government oil import deal signed with Saudi Aramco and Emirates National Oil Company (ENOC) — where payment was deferred in Kenyan shillings — played a major role.

This move:

• Reduced monthly dollar demand for oil imports.

• Eased forex pressure that normally spikes during global oil price surges.

Energy CS Davis Chirchir stated:

“The oil deal has allowed us to save over USD 500 million in monthly forex outflows.”

5. The Role of Monetary Policy

The CBK’s tight monetary policy stance has helped anchor investor confidence:

• Base lending rate was maintained at 13%, keeping inflation in check at around 5.6% in July 2025.

• By resisting pressure to over-issue liquidity, CBK preserved the value of the shilling.

6. Political Stability and Investor Sentiment

Despite political rhetoric, the Kenyan market has seen relatively low post-election unrest compared to 2017 or 2007. Investors, especially in Eurobond markets, see Kenya as stable and well-managed.

This is also supported by:

• IMF and World Bank reviews.

• Fitch and Moody’s giving stable outlooks despite debt concerns.

But Not All Is Well…

While the shilling is stable, it comes with trade-offs:

Importers:

Importers complain of delayed dollar access and higher spreads in banks vs CBK official rates.

 Manufacturers:

The high-interest rates needed to defend the shilling are hurting local production, with loans unaffordable to most SMEs.

 Depleted buffers:

Maintaining the peg eats into CBK’s reserves — which, though healthy now, may not last if external shocks worsen.

 Is It Sustainable?

According to financial analyst Aly-Khan Satchu:

“The shilling's calm is more of a managed float than true market discovery. If Kenya faces another oil price spike or remittances drop, the cracks could show.”

Economist Ken Gichinga warns:

“We’re in a sweet spot now, but there’s no room for complacency. Reforms are still needed on debt and revenue mobilization.”

Bottom Line

The Kenyan Shilling’s unusual stability over the past 12 months is not magic — it’s the result of:

• CBK’s forex interventions,

• Strong diaspora flows,

• Better export performance,

• Government oil import strategy,

• And a tight monetary policy stance.

Whether this calm will last depends on how long CBK can defend it, and whether underlying structural reforms can match Kenya’s growing debt and import bill.