Kenyan Shilling Skyrockets by 17.8% in 2024: What’s Fueling the Surge?

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The Kenyan shilling has made significant gains against the US dollar this year, appreciating by 17.8% from January to June. This growth reflects a combination of favorable market conditions, increased foreign exchange inflows, and investor confidence.

Weekly Performance and Key Drivers

In the past week, the shilling strengthened by 1.06%, closing at 128.66 from the previous week’s 130.04. This is the highest level reached since March 2023. Key factors contributing to this rise include substantial inflows from tea exports and expectations of financial support from the World Bank.

Market Dynamics: The recent appreciation of the shilling can be attributed to a higher supply of foreign currency in the market compared to demand. This supply-demand balance has been influenced by increased export earnings, particularly from tea, which is one of Kenya’s major exports.

Investor Confidence: Another significant factor has been the settlement of a Eurobond, which boosted investor confidence. Additionally, the Central Bank of Kenya (CBK) has maintained a hawkish monetary policy stance, which has further supported the shilling. A hawkish policy typically involves higher interest rates, which can attract foreign investment and support the local currency.

Treasury Bills and Interest Rates

Despite the positive performance of the shilling, treasury bills underperformed slightly in the recent auction, with a subscription rate of 94.7%, down from 150.98% previously. The 91-day treasury bill, however, remained popular due to its attractive yields. High yields on short-term government securities can attract investors looking for safer, high-return investments.

Foreign Reserves: Kenya’s foreign reserves stood at $7.012 billion, equivalent to 3.7 months of import cover. This is slightly below the CBK’s target of maintaining at least four months of import cover. Sufficient foreign reserves are crucial for stabilizing the currency and supporting international trade.

Diaspora Remittances

Diaspora remittances have played a significant role in bolstering Kenya’s foreign exchange reserves. In May 2024, remittances rose by 1.8% to $404.4 million, representing a 14.9% increase compared to the same period last year. The United States remains the largest source of these remittances, contributing 48% of the total.

Cumulative Inflows: For the year ending May 2024, total diaspora remittances reached $4.509 billion, marking a 12.8% increase from the previous year. This steady inflow of foreign currency has been vital in supporting the shilling and providing a buffer against external economic shocks.

Central Bank’s Outlook

Central Bank Governor Kamau Thugge expressed optimism about the future stability of the shilling. He highlighted the balance between foreign exchange inflows and demand as a key factor in maintaining stable exchange rates. The governor also noted that the CBK’s monetary policy will continue to support the shilling’s strength by ensuring that foreign currency reserves remain at healthy levels.

Future Prospects: Looking ahead, the shilling is expected to remain stable, supported by ongoing inflows from exports and remittances. The anticipated funds from the World Bank and other international financial institutions will further bolster Kenya’s foreign reserves and provide additional support to the currency.

Economic Implications

The appreciation of the shilling has several implications for the Kenyan economy. A stronger shilling can help reduce the cost of imports, making goods and services cheaper for consumers and businesses. This can contribute to lower inflation rates, which is beneficial for economic stability.

Export Competitiveness: However, a stronger currency can also make Kenyan exports more expensive on the international market, potentially reducing demand. This could impact sectors such as agriculture and manufacturing, which rely heavily on exports.

Investment Climate: On the positive side, a stable and strong shilling can attract foreign investment by reducing exchange rate risk. Investors are more likely to invest in a country with a stable currency, as it reduces the potential for losses due to currency fluctuations.

Challenges and Risks

Despite the positive performance of the shilling, there are several challenges and risks that could impact its future trajectory. These include global economic conditions, changes in commodity prices, and domestic economic policies.

Global Economic Conditions: The global economic environment remains uncertain, with potential risks from geopolitical tensions, fluctuating commodity prices, and changes in global trade policies. These factors can impact Kenya’s export earnings and foreign exchange inflows.

Commodity Prices: Changes in the prices of key commodities, such as tea and oil, can also affect the shilling. For instance, a decline in tea prices could reduce export earnings, while higher oil prices could increase import costs, putting pressure on the shilling.

Domestic Policies: Domestically, economic policies and political stability play a crucial role in maintaining investor confidence and supporting the shilling. Policy decisions that promote economic growth and stability will be essential in sustaining the currency’s strength.


The Kenyan shilling’s 17.8% appreciation year-to-date reflects a combination of favorable market conditions, increased foreign exchange inflows, and strong investor confidence. While there are challenges and risks ahead, the overall outlook for the shilling remains positive, supported by continued inflows from exports and remittances, as well as prudent monetary policies by the Central Bank of Kenya.

As the country navigates the complex global economic environment, maintaining a stable and strong currency will be crucial for economic stability and growth. The government and the central bank will need to continue their efforts to attract foreign investment, support key export sectors, and manage foreign exchange reserves effectively to ensure the long-term strength of the Kenyan shilling.

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