Kenya’s Currency Resilience Amid U.S. Aid Freeze

By George Obulutsa

NAIROBI (Reuters) – Kenya’s central bank governor stated on Thursday that there hasn’t been a significant impact on the exchange rate due to U.S. President Donald Trump’s freeze on foreign aid.

In late January, Trump placed a halt on most foreign development assistance while seeking to assess the efficacy and alignment of these programs with his foreign policy.

Central Bank Governor Kamau Thugge attributed the health of Kenya’s foreign exchange reserves, now approximately $9 billion (over four months’ worth of imports), to strong remittance inflows.

“We don’t see much impact on the exchange rate from the freeze on aid. We see our foreign exchange reserves remaining fairly strong and the exchange rate stable,” he indicated during a news conference.

On Wednesday, Finance Minister John Mbadi expressed concern that the aid freeze could severely affect Kenya, given the limited fiscal space to absorb the loss. He expressed hope that the United States might reconsider its decision.

Year-to-date, Kenya’s shilling has not significantly changed against the dollar. It finished 2024 up about 21% following a bond buyback that alleviated worries regarding potential government default.

Additionally, the central bank lowered its main interest rate for the fourth consecutive meeting, aiming to enhance lending and stimulate economic growth. The Central Bank Rate was reduced by 50 basis points to 10.75%, aligning with predictions from a Reuters poll of four economists.