The Kenya shilling has firmed to Ksh 125 against the US dollar, marking its strongest sustained position since early 2022 and representing a remarkable recovery from the crisis lows of Ksh 162 recorded in October 2023. The appreciation, which has been gradual but consistent over eighteen months, reflects a fundamental improvement in Kenya’s current account position, robust remittance inflows, and a broad weakening of the dollar in global currency markets.
Central Bank of Kenya data shows that the current account deficit narrowed to 3.8 per cent of GDP in the year to March 2026, down from a peak of 6.1 per cent in 2022/23. The improvement has been driven by three main channels: a recovery in goods exports — particularly tea, horticulture, and coffee — stronger services export earnings from tourism, and a surge in diaspora remittances that reached a record $4.6 billion in the calendar year 2025.
Export Gains and Tourism Boom
Kenya’s traditional export base has performed well. Tea earnings rose 11 per cent to $1.3 billion in 2025, buoyed by strong demand from Pakistan, Egypt, and United Kingdom markets and supported by improved rainfall. Horticulture — cut flowers, vegetables, and fruit — brought in $940 million, a record, as Kenyan growers captured market share in the European Union following Brexit-related disruption to Zimbabwean and South African competitors. Coffee, benefiting from improved El Niño-rebound harvests in the Central region, contributed $275 million.
Tourism has been the standout performer. International arrivals reached 2.4 million in 2025, surpassing the previous record set in 2019, and the Kenya Tourism Board reports that revenue per visitor has increased significantly as the country targets higher-spending tourist segments from the United States, Asia, and the Gulf. Nairobi’s Jomo Kenyatta International Airport has reopened its expanded Terminal 2, adding critical capacity that had been a bottleneck during peak seasons. The SGR passenger service has also become a popular tourist product, with the Nairobi–Mombasa express carrying over 180,000 tourists in 2025 alone.
“The shilling’s recovery is not an accident — it reflects real improvements in the economy’s earning capacity,” said CBK Governor Dr. Kamau Thugge. “We have more foreign exchange coming in from more diverse sources than at any time in our recent history, and that provides a much more stable foundation for the currency.”
Implications for Businesses and the Wider Economy
The stronger shilling is a double-edged development for Kenya’s economy. For importers — who bring in fuel, industrial machinery, pharmaceutical ingredients, and consumer goods — currency appreciation reduces costs and eases inflationary pressure on imported items. Manufacturers that rely on imported raw materials have seen input cost relief, which is beginning to show up in moderating producer price indices.
For exporters, however, the picture is more nuanced. A strengthening shilling erodes the local-currency value of dollar-denominated export revenues. Tea and flower exporters, whose costs are largely in shillings but revenues in foreign exchange, have noted that the shilling’s appreciation has trimmed their margins. Some horticulture growers in Naivasha and Thika have called on the government to consider export incentive programmes to offset the competitiveness headwind.
Kenya’s foreign exchange reserves have also improved markedly. The CBK’s usable reserves stood at $8.6 billion at end-June 2026, equivalent to 4.7 months of import cover — comfortably above the CBK’s own minimum benchmark of four months. This provides a meaningful buffer against future external shocks and reduces the urgency of emergency financing from multilateral institutions.
Economists remain cautiously optimistic. Global conditions — particularly US Federal Reserve policy and commodity price trends — could reverse the shilling’s gains if they deteriorate. But for now, the currency’s recovery stands as one of the cleaner economic success stories of President Ruto’s administration heading into the 2027 electoral cycle.
0 comments