Why Kenyans Are Still Struggling Financially Despite a Stronger Shilling
The Kenyan shilling has remained stable at around Ksh129 per US dollar since August, sparking discussions on how this affects businesses and ordinary citizens. While a strong currency is often seen as a sign of economic strength, many Kenyans are still struggling with high living costs, raising questions about the real impact of this stability.
CBK’s Role in Keeping the Shilling Strong
Treasury Principal Secretary Chris Kiptoo has suggested that the exchange rate might have been much lower—potentially around Ksh100 per US dollar—if the Central Bank of Kenya (CBK) had not been buying dollars to stabilize the currency. Speaking at an economic forum on Thursday, Kiptoo explained that CBK’s interventions were crucial in preventing the shilling from appreciating too quickly.
“In fact, the Central Bank has been actively purchasing dollars over this period. Imagine if they hadn’t done so—the shilling could have strengthened even further, perhaps reaching Ksh100 per dollar,” he said.
Economists Question the Shilling’s Stability
The long period of stability in the exchange rate has raised eyebrows among economists, with some questioning whether the government is artificially controlling the shilling’s value. Economic analyst Kwame Owino pointed out that while global currencies have fluctuated, the Kenyan shilling has remained within the 128–130 range for nearly half a year.
“If you examine the shilling’s performance over the past eight or nine months, it has barely moved. The question is, what exactly is keeping it so stable?” Owino asked.
One of the key concerns is that the shilling may be too strong for Kenya’s export sector. Owino explained that, globally, the US dollar has been strengthening, meaning that the Kenyan shilling has actually gained an extra 10% in value. While this might sound like good news, it poses challenges for export businesses and the tourism industry.
“A currency that is too strong makes Kenyan exports more expensive for foreign buyers. This can hurt our global competitiveness, slowing down economic growth and job creation,” Owino warned.
Why Kenyans Aren’t Feeling the Benefits
A stronger shilling generally leads to cheaper imports, which should, in theory, benefit consumers. However, many Kenyans say they haven’t seen any real relief in their daily expenses. Despite reports that inflation is under control, the cost of living remains high, and wages have not increased to match past price surges.
Kenya’s inflation rate dropped to 3.3% in January from 3% in December 2024, but Owino argued that this doesn’t mean life has become more affordable. “People are poorer now than they were during the COVID-19 period. Salaries have not gone up in line with previous price increases, so households are still struggling to make ends meet,” he said.
Even though the prices of staple foods, such as maize flour, have slightly declined, the reductions are not enough to counteract the steep price hikes seen in previous years. According to Owino, inflation appears low not because goods have become significantly cheaper, but because many people can no longer afford to spend as much.
“The decline in inflation is misleading. It’s not that prices have truly dropped—it’s that demand is weak because people don’t have enough money. Wages have remained stagnant, so spending power is low,” he explained.
Businesses Also Feeling the Pressure
The private sector has also expressed concerns about the economic situation. Kenya Private Sector Alliance (KEPSA) CEO Carol Kariuki echoed similar sentiments, noting that even though prices may appear to be going down, the reality is that businesses are struggling because consumers have less money to spend.
“The economy might look like it’s improving, but the truth is that people are cutting back on spending. Businesses are still producing goods, but the demand isn’t there,” she said.
The Hidden Risks of a Stronger Shilling
While a stronger currency makes imports cheaper, which could lower the cost of goods, it can also have negative effects on industries that rely on exports. Kenyan products become more expensive for international buyers, making it harder for local businesses to compete in the global market. This could slow down economic growth, limit job creation, and reduce foreign earnings.
At the same time, the high cost of living has not eased significantly, meaning any potential benefits of a stronger shilling are being overshadowed by deeper financial struggles. Even though inflation is below 5%, years of rising prices and stagnant wages have made it difficult for many households to recover.
The government remains optimistic that exchange rate stability will eventually lead to economic improvements. However, until wages increase and consumer demand strengthens, the financial relief that many Kenyans hope for may remain out of reach.
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