Over the past 15 months, the Kenyan currency has remained stable against major global currencies, notably the US dollar.
The shilling is trading at an average of Ksh.128 to Ksh.131 against the dollar. This marks over a year of the Kenyan currency stability.
It is this stability that experts now say has been manipulated. According to Trading Economics, the shilling has strengthened by a mere 0.1% against the dollar over the last 12 months, effectively remaining flat.
Such steadiness would normally be celebrated. However, it is this stability that is now being put in question by the International Monetary Fund (IMF).
National Treasury Cabinet Secretary John Mbadi has admitted that the government is currently artificially managing the Kenya Shilling exchange rate against the dollar at 129.
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“The stability of the shilling has a basis. If it is just allowed to free fall, the shilling would even trade at 118 to the dollar. Our current account balance has been improving and our exports are doing better,” said Mbadi.
For close to one year now, the local currency to USD rate has been within the range of 129 without any significant movements.
According to the IMF, the Kenyan currency’s rate against the dollar of between 129.22 and 129.24 since January 2025 has been too stable to be natural.
The currency’s current rate is despite the US dollar being weaker against major currencies in 2025.
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“They were in town two weeks ago, and one of the things they told us is that the exchange rate is too stable, yes on of the things the IMF told us when they were in town two weeks ago is that the exchange rate is too stable that they think it is interfering with the transmission and that it is interfering with inflation targeting,” Kenya Revenue Authority Chairperson Nderitu Muriithi told Citizen TV.
It is this proclamation that has the government fumbling to distance itself from the insinuation of currency manipulation.
Shilling holds steady at 128–130 per dollar
Historical Context and Recent Fluctuations
The shilling first took a turn for the worse after the August 2022 General Elections. Forex data from the Central Bank of Kenya shows that as at August 2022, the Shilling traded at 119.12 against the US dollar.
On January 15, 2024, the local currency recorded a nasty historical low after sinking past 160 to the US dollar. Later that month, it touched an all-time low of 161 on January 23, 2024.
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Between February 9, 2024 and February 29, 2024, the local currency went from 160 to 143.5. In the first quarter of 2024, the Kenyan shilling took its worst hit, significantly depreciating against the US dollar to trade at over Ksh.160 to the dollar in January, before gaining against the greenback to trade at Ksh.144 by mid-February, and later down to Ksh.127 in April 2024.
The currency has since been trading at an average of Ksh.128 to Ksh.131 to the dollar to date.
Government's Perspective and Economic Factors
David Ndii, Chair of Economic Advisors in President William Ruto’s office, says that the stability in the foreign exchange market is not policy-driven.
“A lot of these debates and the IMF asking whether it is too stable or too unstable is basically witchcraft, this is basically witchcraft we economists do, which can go this way or that way, but the policymaker has to be pragmatic,” says Ndii.
Dr David Ndii, the Chairperson of the Presidential Council of Economic Advisers, argues that the CBK has been switching between setting interest rates and creating a dollar peg as a measure to check imported inflation.
A strong and stable shilling therefore helps keep the cost of imported goods low.
“We say our (monetary) instrument is interest rates but when you try uncovering it, it flips between the two (interest rate and exchange rate). “The best example to look at is Argentina, the country has tried to stabilize its economy and inflation by having a fixed exchange rate.
“The exchange rate can be an inflation anchor. If you are in a Western country with deep financial markets, interest rates have a strong transmission mechanism. For nearly a year, Kenya’s exchange rate has remained largely unchanged.
For comparison, the Tanzanian shilling’s annual range exceeded 5%. The South African rand moved nearly 20%.
The essence of the IMF’s concern is straightforward: When a currency refuses to move - despite large shifts in global capital, inflation, or interest rates - something deeper is anchoring it. That “something,” analysts suggest, could be a mix of policy management, forex interventions, or administrative controls that dampen market dynamics.
Despite speculation, there are legitimate economic factors supporting the Kenyan currency’s apparent resilience.
Potential Risks and Considerations
But stability is not always synonymous with strength.
a) Overvaluation and Competitiveness - If the shilling is artificially supported, it may be overvalued relative to Kenya’s trading partners. An overvalued currency makes exports, such as tea, coffee, horticulture, and tourism, more expensive abroad, while encouraging imports.
b) Policy Transmission Risks - The CBK has worked hard to manage inflation through interest-rate adjustments.
c) Reserve Depletion - Defending a currency consumes reserves.
d) Debt Servicing Pressures - Roughly half of Kenya’s external debt is dollar-denominated.
Kenya is not new to exchange-rate anomalies. The current phase of near-perfect stability may thus represent a policy overcorrection-a desire to avoid the chaos of the past.
For businesses, this predictability has been a blessing. However, for exporters and policy-makers, the trade-offs are growing sharper. Export competitiveness is eroding quietly. Inflation targeting is becoming less effective.
Kenya’s macroeconomic fundamentals remain broadly positive - GDP growth above 5%, contained inflation, and solid remittances. However, with public debt nearing 70% of GDP, fiscal space is narrow, and a misaligned currency could amplify these risks.
The prudent course is not to chase volatility but to allow limited, market-driven flexibility in the exchange rate.
“The shilling looks peaceful on the surface, but like a dammed river, pressure builds behind the wall. Inflation vs. Kenya ~6.4% vs. Kenya’s currency stability over the past year has been both remarkable and revealing.
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