True African History

Introduction: The Stillness

How can a currency remain stable while the economy it represents is under severe strain? This is the central question facing Kenya. For months, the shilling has defied economic gravity, holding steady against the dollar even as the nation grapples with high debt and a cost-of-living crisis.

The answer is that its stability is an illusion, the product of a de facto peg. This is a deliberate policy choice rooted in a complex bargain between Kenya’s domestic elites and its international creditors. The policy has purchased a short-term calm, but it is a rented calm - and the rent is being paid, silently and daily, by the nation’s producers and exporters.

Part 1: The Four Tells of a Managed Currency

Even without an official announcement, four clear signals ("tells") reveal that the shilling's stability is actively managed rather than purely market-driven:

The First Tell – The Stillness Itself:

For long stretches, the profound lack of volatility in the shilling is hard to square with a freely floating currency. In 2025, the shilling traded in an astonishingly narrow band (around KSh 129 per US$) for nearly a year. Such consistency defies the usual ebb and flow one would expect. By comparison, Uganda's and Tanzania's currencies have moved with global trends, but Kenya's rate seemed almost frozen in place. The scene at the trading desk underscores this point: dealers start each morning awaiting a tone that seems already set. When a currency barely blinks in the face of news or seasonal cash flows, something other than pure market forces is at work. This unnatural calm in the rate is our first sign. A currency in a dynamic, import-dependent economy should not behave like a fixed asset

The Second Tell – New Dollars, New Calm:

Episodes of stability tend to follow infusions of hard currency. When Kenya received a sizable IMF disbursement or successfully issued a Eurobond, pressure on the shilling mysteriously eased. For example, after a Eurobond sale in early 2024 raised fresh funds, the shilling actually appreciated by over 9% within days. The connection is causal and direct: the stability is not being earned by the economy, but rather purchased with borrowed dollars. Previously, fears that Kenya would burn through its dollar reserves to meet a looming bond repayment had weakened the shilling; once those fears were allayed by new dollars, the shilling strengthened. Similarly, IMF loan tranches – which boost the central bank's reserves – often coincided with periods of stability in the exchange rate. These dollars are the fuel for the shilling's managed stability. In effect, the calm comes on rent: as soon as new foreign currency arrives, it is used to shore up the shilling's price.

The Third Tell – The Tamed Market:

If one watches how banks and forex dealers quote the shilling, the price action reads as if a single heavy hand sets the tone each day. On the street this is palpable: commercial banks tend to post very similar exchange rates for importers buying dollars, and they adjust those card rates or Letters of Credit quotes in near-unison. Market participants suspect that behind closed doors the central bank uses moral suasion – or more – to guide these rates. A Nairobi currency trader noted in early 2023 that the central bank's "aggressive market policing" had effectively subdued the interbank forex market, smothering the usual back-and-forth of a free market. For Kenyan businesses, this translates into a practical reality: the daily struggle to source dollars is not about finding the best price, but about getting access to an officially managed supply. The result is an uncanny synchronicity in pricing and a paucity of intra-day volatility. When the entire market seems to march to the same drumbeat, it hints that someone big is beating that drum.

The Final Tell – The Logic of the Impossible:

In global finance, there is a well-known principle called the "impossible trinity." A country cannot simultaneously fix its exchange rate, allow free movement of capital, and run an independent monetary policy – it must pick two of the three. Kenya officially claims to have a floating currency and an open capital account while also setting interest rates for domestic goals. In reality, by choosing to stabilize the exchange rate, it inevitably sacrifices some monetary independence. Interest rate decisions start bending to the needs of the screen (the exchange rate target) rather than the needs of the street (the domestic economy). Indeed, Kenya has often kept interest rates higher for longer or taken liquidity out of the system not purely to fight inflation, but to make holding shillings more attractive when the currency was under pressure. This was evident in the Central Bank's own statements throughout late 2023 and 2024, where monetary policy committee decisions repeatedly cited exchange rate stability as a primary justification for maintaining a tight policy stance, even as the domestic economy slowed. The country is living the impossible trinity trade-off: defending an unofficial peg means monetary policy is largely enslaved to that defense. This telltale contortion – policy made to serve the currency rather than the citizen – confirms that the shilling is in a gilded cage, not freely flying.

Part 2: The Bargain

Why maintain this gilded cage? The answer lies in a rational (if short-sighted) political economy bargain. Multiple powerful actors have incentives to uphold the shilling's overvaluation, even at the expense of broader economic health:

The National Treasury:

For Kenya's government financiers, an artificially strong shilling is a tool of fiscal survival. Nearly half of Kenya's public debt is denominated in foreign currencies, especially dollars. A steep devaluation would instantly balloon the shilling cost of servicing that debt – blowing up the budget and risking default. By holding the exchange rate stable, the Treasury can keep the shilling value of external debt payments appearing manageable. In 2024, for instance, the government's debt-to-GDP ratio actually fell from the previous year partly because the shilling strengthened in the second half. In other words, a firm shilling makes Kenya's debt metrics look tamer on paper. Likewise, many of the government's essential imports (fuel, medicines, equipment) are priced in dollars – a weaker shilling would force painful budget revisions to subsidize or purchase these. And then there is rollover risk: Kenya relies on continually refinancing domestic debt; a currency crisis could spark capital flight or interest rate spikes that make rolling over bonds extremely difficult. Thus, to the Treasury, a stable shilling is like a fortified wall holding back a tide of fiscal trouble. It buys time, keeping the "debt-service hump" from suddenly crushing the budget. This is a key part of the bargain: the state opts to pay a hidden economic cost (via a strong currency) in exchange for short-term fiscal breathing room.

The Banking Sector:

Kenyan banks quietly cheer for a steady or strong shilling as well. Over the past decade, banks have extended significant loans denominated in dollars to local firms – especially in sectors like manufacturing, transport, and energy. If the shilling were to sharply drop in value, these dollar loans would become far more expensive in shilling terms overnight. Many borrowers would struggle to service them, and some would default. That scenario would dump huge losses onto bank balance sheets. In effect, a sudden devaluation could turn a chunk of banks' loan books into non-performing loans and erode their capital base. The banks also have foreign currency liabilities and often narrow liquidity buffers in dollars; a run on dollars would be perilous. By contrast, a stable shilling means banks' dollar assets and liabilities remain in balance, and their clients in dollar debt can keep paying. There is evidence that roughly a quarter of all Kenyan bank credit is in foreign currency, a proportion that underscores the vulnerability. Bank executives know this well. It is no surprise that they support the Central Bank's steady-hand approach. The currency peg (unspoken though it is) acts as a shield for the banking system's stability. Bankers may grumble that the tight currency control reduces trading profits, but they much prefer that to a disorderly forex spiral that could threaten their solvency. The banking sector is thus a crucial (if quiet) constituency in the pro-strong-shilling coalition.

Donors and the IMF:

One might expect international lenders to always push for freely floating currencies. In public, indeed, the IMF urges Kenya to allow more exchange-rate flexibility. But the reality of IMF programs creates subtle incentives that align – in the near term – with the peg. Under Kenya's recent IMF loan arrangements, the Central Bank of Kenya (CBK) has been bound by Net International Reserve (NIR) targets, meaning it must maintain a minimum level of foreign reserves. Every dollar spent to prop up the shilling eats into those reserves and could jeopardize the IMF program targets. So what's a central bank to do when the currency is under pressure but it "can't" burn reserves? The path of least resistance is to suppress demand for foreign currency and manage capital flows administratively, rather than allow a free fall. In practice, this has meant the CBK often rationed dollar liquidity to banks, tightened monetary conditions, and leaned on government-to-government deals (such as oil import agreements that delay cash outflows) to reduce immediate dollar demand. These measures are forms of stealth capital control, taken instead of an official devaluation. The IMF, for its part, has been tacitly tolerant as long as Kenya meets the reserve floor and inflation stays in check. After all, a sudden currency crash would also jeopardise Kenya's ability to repay the Fund. Thus, donors and the IMF become, somewhat grudgingly, part of the coalition sustaining the status quo. They prefer Kenya's "silent peg" to an open crisis, at least until their programs end.

These actors – the Treasury, the banks, and the external financiers – form a powerful, rational alliance in favour of the shilling's gilded cage. Each is playing their hand within their constraints: the government averting a debt spiral, banks avoiding a solvency scare, and IMF programs aiming for "stability" and who-knows-what-else. Who pays for it? The loser in this bargain is found in a packhouse near Thika, sorting fresh produce for export at dawn. This farmer-exporter and countless like her quietly shoulder the cost. An overvalued shilling is a hidden tax on Kenya's producers. It means fewer shillings for each dollar of horticulture earnings, thinner margins for textile and tea exporters, and a tougher competitive battle against regional rivals who've let their currencies depreciate. Over time, that tax saps investment in the very sectors that Kenya needs for sustainable growth. In short, the bargain trades away long-term development and job creation for short-term financial stability. It is a devil's bargain struck in silence, renewed each day the shilling stays flat.

Part 3: How These Stories End

History, especially recent African history, offers a sobering guide to how such currency bargains eventually unwind. Kenya is not the first country to hold its exchange rate artificially steady under mounting pressure. Similar stories have played out in Cairo, in Accra, in Abuja – and the endings have not been happy from the perspective of the peg defenders. Consider three cautionary cases:

Egypt – The Slow Squeeze:

Egypt spent much of 2022–2023 managing a tightly controlled exchange rate even as dollars grew scarce. The Central Bank of Egypt doled out periodic step-devaluations of the pound, each one a pre-condition to unlock the next tranche of an IMF loan. It was a slow squeeze that tried to let the air out gradually: a 15% drop here, another 20% drop there, all while insisting that a free float was just around the corner. But the real float was always delayed – until it could be delayed no more. In March 2024, facing a full-blown hard currency crunch, Egypt finally let the pound loose; it plunged from about 30 EGP to the dollar to over 50 EGP in a matter of days. Only after this massive 40%-plus correction did the IMF agree to increase its support package for Egypt. The aftermath has been painful: inflation soared above 30%, and ordinary Egyptians saw their savings gutted. The lesson from Cairo is that gradualism can buy time, but if that time isn't used to build economic capacity (like more exports or fiscal reforms), the reckoning only grows larger. Egypt's pound, held too strong for too long, ultimately fell even further than it might have if allowed to adjust earlier. The slow squeeze ended in a sudden snap.

Ghana – The Sudden Shock:

Ghana's currency saga took a sharper turn. After years of borrowing abroad, Ghana in 2022 found itself shut out of international markets – no one would lend it more dollars. Deprived of new financing and with reserves dwindling, the Ghanaian cedi went into freefall. In the span of a few months in 2022, the cedi lost a huge portion of its value, at one point becoming the world's worst-performing currency that year. As financing dried up, Ghana had no buffer; by late 2022 it hit the wall and announced it could no longer service its external debts. The government was forced to enact a domestic debt default – an extraordinary measure where it restructured and delayed payments on its local currency bonds – to stave off total collapse. This move, coupled with a default on most foreign debts, was effectively an admission of insolvency. The cedi's plunge had driven inflation past 50%, wiping out purchasing power for ordinary Ghanaians. In early 2023, Ghana had to go begging to the IMF, not as a partner in reform but as a patient in triage. The IMF programme that followed demanded painful fiscal cuts and reforms as preconditions to restore stability. Ghana's story shows the "bang" scenario: when the money runs out, the currency peg doesn't gradually adjust – it shatters. With it goes a chunk of the domestic financial system (Ghana's banks took big losses on government bonds), and the country's economic sovereignty is severely dented. Ghana is now rebuilding, but the cost of defending its currency until the last possible moment was a legacy of distrust and austerity that will haunt it for years.

Nigeria – The Big Bang Liberalisation:

Nigeria provides yet another variant. For years, Africa's largest economy operated multiple exchange rates and held an official naira value far above its market rate, all in the name of stability and cheap imports. This led to perennial dollar shortages and a flourishing black market. In mid-2023, a new government in Abuja decided to rip off the bandage. They collapsed the various exchange windows into one and effectively floated the naira overnight – a policy earthquake. The naira's official rate instantly devalued by roughly 30-40%, converging toward the parallel market rate. It was a big bang shift to market-determined pricing. Initially, this move was applauded by investors and analysts as a step toward transparency. But the hoped-for stability has remained elusive. The naira continued to slide after the float; by late 2023 it had lost nearly 50% of its pre-reform value. Inflation in Nigeria spiked above 25% (crossing 30% shortly after), largely due to the soaring cost of imports after the devaluation. While the reform lifted some distortions (and pleased the World Bank and IMF), Nigerians felt immediate pain at the pump and the grocery store (the same reform package also removed fuel subsidies, doubling petrol prices). And despite the "market" approach, the naira still swings wildly, and the central bank has re-imposed some restrictions to prevent complete overshoot. In short, Nigeria's attempt at a hard reset shows that simply removing the peg in one stroke is no panacea – especially if an economy hasn't addressed underlying weaknesses. A big bang can indeed clear out accumulated imbalances, but it comes with a risk: if not supported by broad reforms, it can usher in instability instead of stability. As of today, Nigeria is still seeking a new equilibrium for its currency. The jury is out on whether the pain will pay off, but the immediate aftermath has been economically harsh.

Across these examples, the tripwires for collapse became clear. When reserves thin to a critical level and when government debt auctions start failing or coming at excruciatingly high interest rates, a real price for the currency begins to whisper in markets' ears – often in parallel markets or via forward exchange rates. In Kenya's case, one can already hear some whispers: a slight premium on dollars available through unofficial avenues, reports of importers struggling to get dollars at the official rate and having to seek them elsewhere. These are early alarm bells. They signal that the machinery of the peg will fail once the state can no longer afford the cost of holding the line.

The defenders of Kenya's current policy will counter (as they often do) that keeping the shilling stable averted worse outcomes. They argue that a free fall would have immediately fueled runaway inflation, undermined confidence, and hurt the poorest through spiking fuel and food costs. They are not wrong about the short run. Indeed, Kenya's inflation has been relatively moderate compared to peers, and part of the reason is the stable currency containing import prices. The calm did buy time – but it did not buy capacity. Years of a strong shilling have coincided with widening trade deficits and deindustrialisation; Kenya did not use the reprieve to radically expand exports or fiscal buffers. When the bill for an overvalued currency comes due, it tends to come all at once. A shilling held too strong for too long becomes like a dam holding back a lake of pressure. Eventually, either a controlled release or an uncontrolled breach must happen. The experiences of Egypt, Ghana, Nigeria (and others before, from Zambia to Argentina) show that denial can delay the reckoning, but often at the price of a more violent adjustment later. Kenya's policymakers have bought their stillness with heavy rent – and when that rent can no longer be paid, the eventual movement of the shilling could be sudden and steep.

Part 4: The Three Roads from Here

Kenya now stands at a crossroads with regard to its currency policy. The future isn't binary (collapse or continue); in fact, several paths are conceivable, depending on choices made in the coming months. Broadly, three scenarios loom for how the shilling's story could unfold – call them the best case, the base case, and the worst case:

Road 1: The Best Case – The Controlled Burn:

In this scenario, Kenya's authorities act proactively and decisively to avoid a crisis. Rather than defending an indefensible level, they opt for a controlled burn of the accumulated imbalances. The central bank would announce a clear target trading corridor for the shilling – for example, allowing it to gradually weaken by, say, 5%–10% per year – and then actually permit that movement. Interventions would only occur at the edges of this band to prevent disorderly swings, not to freeze the rate entirely. This approach would be paired with a season of tight monetary policy (high interest rates and restricted money supply growth) to anchor inflation expectations even as the shilling is allowed to drift lower. The aim is an orderly depreciation: enough to restore export competitiveness over time but not so fast as to panic markets. Painful adjustments would still occur – imports would get pricier, and interest rates might stay high – but it would be a managed pain, telegraphed and deliberate. Crucially, this path would require political resolve: admitting that the exchange rate needs to adjust and communicating to the public why short-term pain averts long-term catastrophe. If executed well, Kenya could escape the worst crises and preserve a good degree of its economic sovereignty. The shilling's decline would be modest and controlled enough that people and businesses could plan for it. Think of it as a series of small, contained fires that prevent a giant wildfire. This is the path of prudence and foresight. Few countries choose it, because it means taking away the punchbowl voluntarily – but those that do are often rewarded by avoiding the kind of currency collapse seen elsewhere.

Road 2: The Base Case – The Staggered Retreat:

This scenario is less an active choice and more the likely outcome if authorities continue muddling through without drastic changes. Here, the peg slowly gives ground in fits and starts. Periods of stability will be punctuated by periodic jolts of devaluation when pressure can't be contained – perhaps a 10% drop one quarter, then another pause, then another lurch down. Each step might be triggered by events: an IMF program review that insists on more flexibility, a quarter of bad export numbers, a spike in oil prices draining dollars, etc. Between these step-downs, the shilling might plateau for months as the central bank again intervenes to steady it, until the next mini-crisis forces a further retreat. Households and businesses would adjust in staggered fashion – a sudden jump in fuel prices, then a period of stability, then another jump. Over, say, a two- to three-year horizon, the shilling could end up significantly weaker (perhaps 20–30% lower than today), but the decline would be broken into stages. This staggered retreat spreads out the pain over time. It is not an ideal path – it keeps the economy in a prolonged state of uncertainty, and each mini-devaluation can reignite inflation and require another round of high interest rates. But politically it may be seen as more palatable: no single dramatic moment of reckoning that could spark public outrage, just a slow grind that people come to accept. Many emerging economies have gone down this road, burning through several IMF programs as they inch their way to a sustainable exchange rate. It's a path that avoids an immediate crisis but at the cost of a drawn-out adjustment. The risk, of course, is that during one of those devaluation episodes, things could spiral beyond what the authorities intended – turning a staggered retreat into a rout. Barring that, however, this base case would mean Kenya eventually gets to a more realistic shilling value, but only after years of choppy, sub-par economic performance. In other words: not an apocalypse, but a slow bleed.

Road 3: The Worst Case – Financial Guardianship:

In this darkest scenario, Kenya's leadership keeps the peg defence up until the very last minute – and overplays its hand. The government continues to insist the shilling is fairly valued and expends every available dollar (and then some, via short-term swaps or expensive loans) to prop it up. Meanwhile, underlying imbalances worsen and confidence erodes. A specific tripwire gets hit – perhaps foreign reserves sink to critically low levels, or a major external debt payment is missed. When that happens, events move at a blistering pace. The shilling's value collapses by tens of percent within weeks, far overshooting any reasonable equilibrium due to panic and speculative frenzy. We're talking a free fall – say the currency loses 30%+ of its value in a month – until it eventually stabilises at a much lower level. This, of course, unleashes a burst of imported inflation: fuel, fertiliser, steel, cooking oil – all skyrocket in price in local currency. The inflation pass-through might send annual inflation to 20% or higher virtually overnight, deeply biting into household welfare (especially for the poorest, who spend a large share of income on food and transport). In this crisis, the government quickly runs out of options and makes an emergency call to the IMF (and any willing donor) for a rescue package. But unlike in ordinary times, this package comes with Kenya in a position of weakness – essentially as a patient on the operating table. The IMF (and possibly World Bank and others) would dictate strict terms as the price of a bailout. This would likely entail a period of financial guardianship: Kenya's economic policy largely directed by external technocrats to restore stability. The playbook in such situations is well-known and harsh. Expect conditions like removal of any remaining subsidies (fuel, electricity, food – no matter the political explosiveness), public-sector hiring freezes and wage bill cuts, tax hikes to raise revenue, and accelerated privatisation of state assets (airports, banks, utilities – anything that can fetch dollars) to plug the financing gap. In essence, Kenya would undergo a forced structural adjustment, akin to what Ghana is experiencing post-default or what Greece endured under EU/IMF oversight. The country's leaders would have minimal say, reduced to implementing orders to unlock tranche after tranche of emergency funds. This is the nightmare Kenya has tried to avoid for decades – becoming a ward of the international community, with sovereignty in economic decision-making heavily compromised. Social unrest would likely spike in this scenario, as austerity measures hit a populace already reeling from the currency shock. While eventually stability might be restored, it would come at a tremendous cost to Kenya's social fabric and political autonomy. This is the road everyone professes they do not want – yet it remains a real risk if corrections are endlessly postponed.

Coda

Calm can be rented; capacity must be built. For years, Kenya has chosen the rent – propping up an official serenity in its currency market at the expense of slowly depleting its economic strength. The shilling's gilded cage has offered protection to those in power and those with balance sheets to guard, but it has also constrained the country's competitiveness and adaptability. The core dilemma facing Kenya is whether to keep paying the steep rent on this artificial stability, or to start investing in the harder work of building resilience – letting the rate adjust, boosting productivity, and trusting Kenyan enterprises to compete on a level currency field. The bargain with time that Kenya's elites have made cannot hold indefinitely; time, after all, has a way of collecting what it is due. The stillness in the exchange rate has been a quiet deception. Eventually, the nation must exhale that held breath. The hope is that Kenya manages that transition on its own terms – through foresight and deliberate policy – rather than having it forced upon them in chaos. The shilling will not be gilded forever. Better to unlock the cage gently now than to watch it shatter later.

References

1. Business Daily Africa (2025). "IMF raises alarm over static Kenya shilling versus dollar." Nairobi: Nation Media Group. (Reporting that the Kenyan shilling traded in the KSh 129 range to the US dollar for nearly a year, prompting IMF concern over the lack of volatility.)
2. Credendo (2024). "Kenya: Successful Eurobond removes looming repayment threat, though longer-term risks remain." Credendo Country Risk Update, March 11, 2024. (Noting that Kenya's February 2024 Eurobond issue led the shilling to appreciate by over 9% as fears of a reserves drain eased, and mentioning a $624 million IMF disbursement that boosted reserves.)
3. Reuters (2023). Duncan Miriri, "Kenya seeks to defer fuel payments to ease FX pressure," Reuters News, Feb 27, 2023. (Describing Kenya's government-to-government oil import deal allowing up to 6–12 months delayed payment for fuel imports to reduce immediate dollar demand. Also quotes a currency trader on the central bank's "aggressive market policing" subduing the interbank forex market.)
4. International Monetary Fund – Regional Economic Outlook (2016). Analysis of exchange rate regimes (Chapter 2) – "the impossible trinity" concept. (Explains that a country cannot have a pegged exchange rate, an open capital account, and independent monetary policy simultaneously. Choosing exchange-rate stability and free capital flows means monetary policy must primarily support the peg.)
5. Fitch Ratings (2024). "Fitch Downgrades Kenya to ‘B-'; Outlook Stable," Fitch Press Release, Aug 5, 2024. (Notes that roughly half of Kenya's government debt is in foreign currency. A stronger shilling in 2024 helped reduce the debt-to-GDP ratio, whereas earlier depreciation had raised it. Also observes the central bank's tightening of policy to support the currency and caution against premature rate cuts.)
6. Reuters (2024). Nafisa Eltahir & Nayera Abdallah, "Egypt secures IMF deal after pound plunge, bumper rate hike," Reuters, Mar 6, 2024. (Details how Egypt, after months of tightly managing its pound, allowed a large devaluation in March 2024 – from ~30.8 to over 49 pounds/US$ – to meet IMF demands for a flexible rate, as part of an expanded $8 billion IMF deal. Notes Egypt's history of pledging flexibility then re-pegging, and the chronic forex shortages that led to this point.)
7. Reuters (2024). "Ghana closes in on long-running debt restructuring finishing line," Reuters, Oct 3, 2024. (Provides a timeline of Ghana's 2022–2023 crisis: after losing market access in early 2022, Ghana sought IMF help by mid-2022. In Dec 2022 it launched a domestic debt exchange to restructure local bonds and announced a default on most external debt. An IMF bailout followed in 2023. This highlights the speed and severity of Ghana's currency and debt collapse when financing dried up.)
8. Bloomberg (2024). "Nigeria's Naira on Path to Stability After CBN Reforms," Bloomberg News, Feb 2, 2024. (Summarises the impact of Nigeria's June 2023 exchange rate unification: the naira depreciated roughly 50% over 2023, including an immediate ~30% one-off drop when the peg was removed in June. Notes that despite the reform, the naira remained volatile and inflation climbed above 25% due in part to the currency's depreciation.)
9. World Bank (2024). "Nigeria Development Update – Staying the Course on Reforms: Progress Amidst Pressing Challenges," October 2024, World Bank Press Release. (Comments on Nigeria's mid-2023 reform package. Confirms that prior to reforms Nigeria had multiple overvalued exchange rates that were distortionary. After unification, the official rate became more market-reflective. Also reports that Nigeria's inflation, driven up by the naira's depreciation and fuel price hikes, was expected to average 31.7% in 2024 before gradually easing.)
10. Chatham House (2023). Fergus Kell, "Kenya's debt struggles go far deeper than Chinese loans," Chatham House commentary, 31 May 2023. (Analyzes Kenya's debt situation; notes that global monetary tightening and a weakening Kenyan shilling have increased the shilling cost of servicing dollar-denominated loans, especially after grace periods on large Chinese loans ended. Illustrates how currency weakness feeds into debt stress.)
11. Business Daily Africa (2018). Otiato Guguyu, "Shilling overvalued by 17.5 per cent, says IMF," The Standard (reporting on an IMF review), Oct 2018. (An IMF review in 2018 found the Kenyan shilling to be up to 17% overvalued and warned it might reclassify Kenya's exchange regime as "other managed arrangement" rather than free float. The Central Bank disputed this at the time. This highlights longstanding IMF concerns that Kenya's currency is not aligned with fundamentals.)
12. Kenya Bankers Association (2025). "State of the Banking Industry Report – 2025." Nairobi: KBA Research. (Documents the banking sector's exposure to foreign currency risk. By late 2024, an estimated 27% of Kenyan bank loans were denominated in foreign currencies, while around 30% of bank liabilities were also in foreign currency. The KBA report cautions that such exposures pose a threat to banks' capital adequacy if the shilling were to sharply depreciate, as loan defaults would rise and balance sheets would be strained.) (KBA, 2025, p.49).