The Kenyan shilling posted a slight appreciation against the US dollar in 2025, ending the year at Ksh129.0 compared to Ksh129.3 at the close of 2024, according to data cited in Cytonn Research’s Annual Markets Review for 2025, which draws from Central Bank of Kenya figures.

The 0.2 per cent gain marked a sharp moderation from the strong 17.4 per cent appreciation recorded in 2024.

The currency’s performance came amid mixed domestic and global conditions, with foreign exchange inflows providing support while structural pressures continued to weigh on the shilling.

Diaspora remittance

Diaspora remittances played a key role in supporting the local currency. In the twelve months to November 2025, Kenyans abroad sent home a cumulative USD 5.05 billion, representing a 3.6 per cent increase from USD 4.87 billion recorded over the same period in 2024.

North America remained the largest source of remittances, accounting for 60.6 per cent of total inflows. These inflows helped stabilise the foreign exchange market and cushioned the shilling from sharper movements.

Tourism earnings

Tourism earnings also strengthened the currency during the year. The Ministry of Tourism projects tourism receipts to reach Ksh560.0 billion in 2025, up from Ksh452.2 billion in 2024, representing a 23.9 per cent increase.

Data from the Kenya National Bureau of Statistics (KNBS) shows that international arrivals through Jomo Kenyatta International Airport and Moi International Airport rose by 52.2 per cent to 745,720 visitors in the third quarter of 2025, compared to 489,831 visitors in the same period last year.

Higher tourism inflows boosted dollar supply and supported the shilling.

Foreign exchange reserves

Kenya’s foreign exchange reserves also improved. By the end of 2025, reserves stood at USD 12.4 billion, equivalent to 5.3 months of import cover.

This level remained above the statutory requirement of four months and exceeded the East African Community convergence target of 4.5 months.

Strong reserves gave the CBK room to manage volatility in the currency market.

Deficits weigh on shilling

Despite these gains, several factors continued to limit the shilling’s upside. Kenya’s current account deficit widened to 2.9 per cent of GDP in the second quarter of 2025 from 1.7 per cent in the same period in 2024.

The deficit increased by 76.6 per cent year-on-year to Ksh83.7 billion, driven by a wider merchandise trade deficit and a weaker services balance. Imports continued to outpace exports, putting pressure on the country’s external balance.

Government debt servicing also weighed on the currency. As of June 2025, 59.7 per cent of Kenya’s external debt was denominated in US dollars, increasing demand for foreign currency and placing pressure on reserves.

Analysts had expected the shilling to depreciate to a range of Ksh134.4 to 140.5 by the end of 2025. Instead, the currency averaged Ksh129.3 during the year, supported by steady foreign inflows and the CBK’s controlled exchange rate approach.

However, the shilling’s limited movement also drew scrutiny from the International Monetary Fund. During talks with Kenyan authorities in late 2025, the IMF questioned whether the currency’s prolonged stability around Ksh129 to the dollar interfered with monetary policy transmission and inflation targeting.