The value of the Kenyan shilling is rising, but experts warn that this trend won’t continue

Kenya’s major currency for foreign transactions, the US dollar, rapidly declined against the shilling shortly after the country’s 2022 elections, igniting a wave of political unrest.

Following the International Monetary Fund’s (IMF) lead, the Central Bank of Kenya (CBK) declared more than a year later that the shilling run was a market correction for a currency that had been overvalued by 20–25 percent.

The shilling recovered by the beginning of this year. Odongo Kodongo, a finance expert, responds to our inquiries regarding the volatility of Kenya’s exchange rates.

How are the exchange rates for the shilling calculated?

Kenya has a floating exchange rate system in place. This implies that market supply and demand ultimately decide the value of the shilling. Money flows across borders have an impact on market supply and demand.

The value of exports, foreign transfers (including remittances from the diaspora), and foreign investments are some of the factors that influence the flow of money into the nation.