Kenya’s foreign exchange reserves reached a record high in July, and Treasury officials have said that the shilling would be stronger without central bank dollar buying. EBC Financial Group analyses what a resumed IMF programme would mean for a currency that has barely moved in more than two years.
NAIROBI, 16 September 2026 — Kenya’s shilling has traded within a narrow band against the US dollar for more than two years, standing at KSh129.45 per dollar in the week to 10 September 2026, according to the most recent published Central Bank of Kenya (CBK) data. Over the same period, the CBK accumulated foreign exchange reserves to an all-time high of $15.4 billion on 30 July, easing through August to $14.88 billion by 3 September, or 6.1 months of import cover before rebounding to $15.253 billion by 10 September, or 6.3 months of import cover.
EBC Financial Group (EBC) says that these are not two stories, but one connected policy choice. Kenya has built a reserve buffer that makes exchange rate flexibility affordable, while using that buffer to avoid exercising it. With IMF programme negotiations unresolved, and the Fund’s published guidance to Kenya calling for greater exchange rate flexibility, the market question is no longer where the shilling sits today. It is whether a rate that has barely moved in two years can begin to move without that being read as a loss of control.
“Suppressed volatility is deferred volatility, not absent volatility,” said David Precious, Senior Market Analyst at EBC Financial Group. “Kenya’s reserve position is genuinely strong, and that is worth saying plainly. A nominal rate that does not move, however, does not mean the pressure has gone. It means the pressure has moved: into the reserve line, into what importers pay, and into the real exchange rate as domestic inflation runs underneath a flat nominal one. For anyone holding shilling exposure, the implication is that two years of low realised volatility is a poor guide to forward risk.”
What Has Changed: A Record Reserve Build
Kenya’s usable foreign exchange reserves increased by $1.55 billion in the week to 30 July 2026, rising to $15.4 billion from $13.85 billion a week earlier and extending import cover from 5.9 to 6.4 months. The CBK attributed the increase mainly to capital inflows linked to the government’s partial divestiture of its Safaricom stake. In July, the government sold a 15 percent stake to Vodafone Kenya Limited, a subsidiary of South Africa’s Vodacom, for approximately KSh204.3 billion, with the proceeds placed in the National Infrastructure Fund held at the CBK.
Reserves eased over the following weeks, to $15.155 billion on 20 August, $14.934 billion on 27 August, and $14.88 billion on 3 September, before rebounding by $371 million to $15.253 billion in the week to 10 September, lifting import cover from 6.1 months back to 6.3. They remained above the four-month statutory minimum throughout. A further inflow remains possible following CBK’s 28 August approval of Nedbank Group’s proposed acquisition of a 66 percent stake in NCBA Group, a transaction valued at KSh116.3 billion and still subject to completion. However, the reserve impact may be limited. Under the published terms, holders receive 4.02994 Nedbank shares plus KSh2,100 in cash for every 100 NCBA shares, so the greater part of the consideration is in stock, and the cash element is payable to tendering NCBA shareholders rather than to the state.
The key point is the scale of Kenya’s reserve build. Speaking on 9 April 2026, when reserves stood above $13 billion and external pressure was building on exports, remittances and tourism, CBK Governor Kamau Thugge said the central bank had strengthened its buffers and had built reserves to their current level, in anticipation of that kind of shock. On the central bank’s figures, Kenya now holds a foreign exchange cushion that is comfortable by conventional adequacy measures.
The Deeper Issue: The Treasury Says the Rate Is Held
What distinguishes Kenya’s situation from ordinary currency stability is that senior officials have described the exchange rate as managed rather than purely market determined. In late 2025, Treasury Cabinet Secretary John Mbadi said publicly that the shilling could trade at around KSh118 to the dollar if allowed to move freely, citing an improving current account and stronger export performance. Mbadi and Principal Secretary Chris Kiptoo have separately indicated that, without CBK dollar purchases to build reserves, the currency could have strengthened to between KSh118 and KSh120 to the dollar. Mbadi has also rejected suggestions of currency manipulation, attributing the shilling’s steadiness to higher diaspora remittances, improved export earnings and government-to-government fuel procurement that reduced dollar demand.
Kenya’s Parliamentary Budget Office, the technical research arm of Parliament, reached a similar conclusion in Budget Options for FY 2026/2027 and the Medium Term, subtitled Improving Expenditure Efficiency for Economic Growth, published in February 2026. The report noted that the shilling remained broadly stable against the dollar while weakening around 6.5 percent against the pound over the year to June 2025, and said the pattern, set against normal emerging-market volatility, points to tight exchange rate management or active liquidity smoothing by the Central Bank.
CBK’s stated position is that Kenya maintains a flexible exchange-rate regime and that the central bank intervenes only to smooth excessive volatility. It attributes the shilling’s stability to a stronger current account, higher foreign direct investment, overseas purchases of local-currency bonds, and improved reserve adequacy. CBK does not publish the volume or timing of its foreign exchange market operations, which means the official account and the Treasury officials’ comments cannot be reconciled using public data alone.
The Mechanism: Where the Pressure Goes Instead
A managed nominal rate does not eliminate adjustment. Rather, it changes where the adjustment appears, and that redistribution is what matters commercially. Starting with the arithmetic. If the free-float level is KSh118 to KSh120 as Treasury officials have suggested, then at KSh129.45, as of 10 September, the shilling is roughly 7 to 9 percent weaker than their own estimate of where the market would put it. Every dollar of imports costs Kenyan buyers that much more in shilling terms than it otherwise would. For a country importing fuel, fertiliser, pharmaceuticals and industrial inputs, that difference passes into domestic prices. It also lands unevenly: importers and dollar-denominated borrowers absorb the cost, while exporters and recipients of diaspora remittances receive the benefit of a weaker conversion rate.
The second channel is the real exchange rate. A nominal rate held flat while domestic inflation rises produces real appreciation regardless. Kenyan headline inflation rose from 4.3 percent in February 2026 to 6.6 percent in August, moving unevenly across the period and driven by energy and transport costs. Nominal stability is therefore doing less for export competitiveness over time than the unchanged screen rate suggests, and the gap accumulates quietly rather than resolving through visible currency moves.
The Catalyst: An Unresolved IMF Programme
An IMF staff team visited Nairobi from 24 February to 4 March 2026 for technical discussions regarding a successor economic programme for Kenya. Although CBK Governor Kamau Thugge confirmed that talks continued into August 2026, a new agreement, loan amount, or board approval date has not yet been finalised. The IMF’s most recent completed Article IV consultation with Kenya, the 2023 consultation concluded by the Executive Board on 17 January 2024, stated that greater exchange rate flexibility and addressing foreign exchange market distortions would help keep Kenya’s external position in balance. That is general policy guidance rather than a comment on the current period, and it predates the stability being discussed. It is also the most recent full assessment available: the 2025 Article IV consultation was rescheduled at the request of the Kenyan authorities so that programme discussions could be prioritised. No full Fund assessment covering the current period of stability has therefore been published. If a programme is agreed and carries conditionality along those lines, the exchange rate arrangement described by Kenya’s own Treasury becomes a subject of negotiation rather than domestic discretion.
What a Good Outcome Looks Like
“Success here is not a stronger shilling, and it is not a permanently still one,” Precious said. “It would be a rate that can move two or three percent either way without being read as a loss of control, supported by published intervention data so participants can tell smoothing from steering. Kenya has spent two years building the buffer that makes that affordable. If a programme arrives with flexibility conditions attached, the test will not be whether the shilling moves. It will be whether a move is read as policy working rather than policy failing.” The market question is sequencing: whether flexibility is introduced from a position of reserve strength and on Kenya’s own timetable, or later and under external conditionality.
For more information, visit www.ebc.com.
Disclaimer: This material is for information only and does not constitute a recommendation or advice from EBC Financial Group and all its entities (“EBC”). Trading Forex and Contracts for Difference (CFDs) on margin carries a high level of risk and may not be suitable for all investors. Losses can exceed your deposits. Before trading, you should carefully consider your trading objectives, level of experience, and risk appetite, and consult an independent financial advisor if necessary. Statistics or past investment performance are not a guarantee of future performance. EBC is not liable for any damages arising from reliance on this information.
About EBC Financial Group
Founded in London’s esteemed financial district, EBC Financial Group (EBC) is a global brand known for its expertise in financial brokerage and asset management. Through its regulated entities operating across major financial jurisdictions—including the UK, Australia, the Cayman Islands, Mauritius, and others—EBC enables retail, professional, and institutional investors to access a wide range of global markets and trading opportunities, including currencies, commodities, shares, and indices.
Recognised with multiple awards, EBC is committed to upholding ethical standards and these subsidiaries are licensed and regulated within their respective jurisdictions. EBC Financial Group (UK) Limited is regulated by the UK’s Financial Conduct Authority (FCA); EBC Financial Group (Cayman) Limited is regulated by the Cayman Islands Monetary Authority (CIMA); EBC Financial Group (Australia) Pty Ltd, and EBC Asset Management Pty Ltd are regulated by Australia’s Securities and Investments Commission (ASIC); EBC Financial (MU) Ltd is authorised and regulated by the Financial Services Commission Mauritius (FSC); EBC Financial Group SA (Pty) Ltd is authorised and regulated by the Financial Sector Conduct Authority (FSCA).
At the core of EBC are a team of industry veterans with over 40 years of experience in major financial institutions. Having navigated key economic cycles from the Plaza Accord and 2015 Swiss franc crisis to the market upheavals of the COVID-19 pandemic. We foster a culture where integrity, respect, and client asset security are paramount, ensuring that every investor relationship is handled with the utmost seriousness it deserves.
As the Official Foreign Exchange Partner of FC Barcelona, EBC provides specialised services across Asia, LATAM, the Middle East, Africa, and Oceania. Through its partnership with United to Beat Malaria, the company contributes to global health initiatives. EBC also supports the ‘What Economists Really Do’ public engagement series by Oxford University’s Department of Economics, helping to demystify economics and its application to major societal challenges, fostering greater public understanding and dialogue.