The Kenyan shilling has continued to weaken against the euro and the British pound, raising concerns about the cost of imports and potential trade imbalances. According to data from the Central Bank of Kenya (CBK), the local currency has depreciated by 2.34 percent against the pound this month, trading at 167.1 on Tuesday. Similarly, the shilling has dropped by 2.97 percent against the euro in July, amounting to an overall decline of approximately 5 percent since the beginning of 2025. As of Tuesday, it was trading at 139.7 against the euro.
The depreciation of the shilling against these major European currencies is significant because Kenya conducts a substantial portion of its trade with European nations. The East African country exports coffee, tea, flowers, and horticultural products, with Britain and the Netherlands being the primary importers. In 2024, Kenya earned approximately 137 billion shillings (about 1.05 billion U.S. dollars) from horticultural exports and 1.39 billion dollars from tea exports.
A weaker shilling means that Kenyan exporters could benefit from higher earnings when converting foreign currency revenues back into shillings. However, importers of goods from Europe will face higher costs, potentially driving inflationary pressures on essential goods and services.
Despite the weakening trend against the euro and pound, the Kenyan shilling has remained relatively stable against the U.S. dollar, trading at an average of 129. The stability against the dollar has been attributed to Kenya’s strong foreign exchange reserves, which currently stand at 10 billion dollars. The CBK has also implemented monetary policies aimed at cushioning the currency from excessive volatility.
While a weaker shilling may benefit exporters in the short term, there are concerns about rising import costs and inflation. Economic analysts suggest that the government and the CBK should continue monitoring exchange rate fluctuations and implement policies that balance trade benefits with the need for currency stability.
As global economic trends evolve, Kenya’s ability to maintain stable foreign reserves and enhance export earnings will be critical in mitigating the impact of currency depreciation. Businesses and policymakers alike will need to navigate these changes carefully to sustain economic growth and trade competitiveness.
