The Kenyan shilling appreciated by four per cent against the US dollar in 2025, continuing a period of relative stability that has lasted nearly two years, according to an analysis by the African Development Bank (AfDB).
The local currency averaged an exchange rate of Sh129.3 per dollar in 2025, improving from Sh134.7 in 2024. This marks a significant recovery after the shilling hit historic lows above Sh160 early in 2024.
Factors Behind the Strengthening
- Improved foreign exchange inflows
- Increased diaspora remittances
- Rebound in exports
- Successful issuance of international debt
- Easing inflationary pressures and lower global commodity prices
- Central Bank of Kenya's monetary policy interventions
The shilling’s stability has reassured investors and businesses that depend on imports, keeping the currency largely within the Sh129 range for several months.
Inflation eased to 4.1% in 2025 from 4.5% the previous year, staying within the Central Bank of Kenya’s target range of 2.5% to 7.5%. Lower fuel and commodity costs, along with the stronger shilling, helped contain imported inflation.
In response to the improved inflation outlook, the Central Bank of Kenya reduced its benchmark lending rate six times during the year, bringing it down by 225 basis points to 9% by December 2025.
Outlook and Challenges
While the shilling’s appreciation has bolstered Kenya’s macroeconomic stability and outlook, the AfDB warns that a stronger currency could challenge exporters by making Kenyan products more expensive in international markets.
Nonetheless, the currency’s recovery is seen as a positive development supporting economic growth and investor confidence.
