How Kenya Shilling Compares with Regional Peers After Tanzania Banned Use of Foreign Currencies

• The Tanzanian government banned the use of foreign currencies, including the Kenyan shilling, to salvage its ailing local currency
• The move means that all transactions pertaining to the Kenyan shilling or the US dollar, among others, are not accepted in the country
• According to the Central Bank of Kenya, the Kenyan shilling exchanged at KSh 20.77 per Tanzanian shilling as of Tuesday, May 6
• Speaking exclusively to TUKO.co.ke, market analyst Rufas Kamau explained what makes the Kenyan shilling bullish against other regional and international currencies

Wycliffe Musalia has over six years of experience in financial, business, technology, climate, and health reporting, providing deep insights into Kenyan and global economic trends. He currently works as a business editor at TUKO.co.ke.

Data from the Central Bank of Kenya (CBK) shows that the Kenyan shilling remains bullish against regional and international currencies.

CBK reported that the shilling exchanged at KSh 129.34 per US dollar in the last week of April 2025.

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The local currency registered a four-month high against the greenback since President Donald Trump came into power.

Regionally, Kenya shilling beat the Tanzanian shilling, the Uganda shilling, and the Rwandan franc in the forex market.

Kenya shilling in US dollars compared to regional currencies

Source: CBK

The Tanzanian shilling ranked among the worst-performing currencies, a move that saw the government come up with strategies to salvage it.

In May 2025, the Bank of Tanzania issued a gazette notice banning the use of foreign currencies in the country.

The bank directed all transactions within the country to be completed in Tanzanian shillings.

"Under these Regulations, pricing and payment for all goods and services within the country must be in Tanzanian shillings. Therefore, it is an offence to quote, advertise, or indicate prices in foreign currency, to compel, facilitate, or accept payment in foreign currency, or to refuse payment made in Tanzanian shillings," said in a statement released on May 2, 2025.

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However, the move does not pose a direct impact on the Kenyan shilling.

How Kenyan shilling performed against regional peers

According to CBK, the Kenyan shilling exchanged at KSh 20.77 per Tanzanian shilling as of Tuesday, May 6.

This was an improvement from the last week of April, where it traded at KSh 20.8 per Tanzanian shilling.

Below is how the Kenyan shilling performed against regional peers in the second week of May:

Source: CBK

Will Kenyan shilling continue to stabilise?

CBK noted that the Kenya shilling remains stable, supported by adequate foreign currency reserves, which stood at KSh 1.3 trillion worth of dollars at the start of the month.

The reserves can support up to four months of import cover, meeting the regulator's statutory requirements.

In an exclusive interview with TUKO.co.ke, market analyst at FXPesa, Rufas Kamau, explained that the current drop in international oil prices would reduce pressure on the shilling.

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"With Brent crude oil down 19% since the year started, Kenya is expected to benefit through reduced oil prices at the pump and reduced pressure on foreign exchange reserves," said Kamau.

Diaspora remittance inflows to the country also increased in the first quarter to March 2025.

Kenya's foreign currency reserves

In April 2025, foreign currency reserves remained strong, supporting up to 4.4 months of import cover.

Despite a slight drop reported at the start of the month, CBK remained adamant that the reserves would hold the shilling in the exchange market.

The shilling remained stable against the British pound at KSh 171.9 and KSh 146.6 per Euro during the same month.

Source: TUKO.co.ke