Is it normal for the Kenyan Shilling to sit at 129 against the Dollar for so long? — A closer look.

 



It almost feels impossible: a currency that just over a year ago was crashing past KSh 160 per dollar now stabilizes strongly at around KSh 129, barely moving for nearly two years. For most Kenyans, this stability feels strange, given what the country has endured: global inflation, geopolitical turmoil, Middle East trade disruptions, and domestic political protests. Yet the shilling has barely fluctuated.

In early 2024, Kenya was staring at one of its weakest currency moments ever. The shilling traded at KSh 162–164, foreign debt stress peaked, and a looming Eurobond maturity triggered fears of default. The government and the Central Bank of Kenya (CBK) responded aggressively: a $1.5B Eurobond buyback, continued support under the IMF’s Extended Credit Facility, and a push to rebuild foreign-exchange reserves. Tighter fiscal and monetary policy also helped restore confidence, allowing the shilling to climb back into the 130s and eventually settle around 129, where it has rested.

Several factors genuinely support the shilling’s stability. Kenya’s forex reserves are currently strong, covering 5.2 months of imports, offering CBK room to smooth volatility when needed. US dollar inflows from remittances, tea, coffee, horticulture, and diaspora investments have held steady. There has also been better macroeconomic discipline, slower domestic borrowing, improved debt-service planning, and coordinated fiscal measures. On the global front, U.S. interest rate cuts have eased pressure on emerging market currencies, and recent U.S. tariff changes on Chinese goods have boosted opportunities for African exporters in certain sectors, indirectly increasing dollar inflows.

Even with these positives, many still find the stability unusual. Under a truly flexible exchange-rate regime, a currency should move more in response to global shocks. Yet despite Middle East instability, high global oil prices, Red Sea shipping disruptions, and local political protests, the shilling has remained tightly anchored. That’s why some analysts, including the IMF, suspect managed stability. However, the fact that forex reserves are rising, not falling, weakens the idea of heavy dollar-selling by CBK.

My view is that the stability is real but fragile. It reflects a rare combination of strong inflows, rebuilt reserves, improved fiscal discipline, and occasional CBK smoothing. But it is not a permanent condition. A sudden shock, such as a spike in oil prices, capital flight, or renewed external debt pressure, could easily disrupt this balance.

For ordinary Kenyans, the key message is not to treat 129 as guaranteed. If you earn in dollars, this is a beneficial time to convert. Importers should use the current stability to plan confidently and lock in predictable costs. And everyone should keep an eye on forex reserves, export performance, and global economic trends.

In sum, Kenya’s two-year stability at KSh 129 appears to be a temporary equilibrium, not a new normal. It is a welcome breather created by strong reserves, steady inflows, disciplined macro policy, and favorable global conditions, but it can shift quickly.

 

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