Kenyan Shilling Forecast to Strengthen Against US Dollar, 21 African Currencies to Weaken in 2025
- The African Development Bank (AfDB) published its Africa Economic Outlook on Tuesday, May 27, highlighting economic developments in the continent
- AfDB explained that financial market volatility may have an impact on African currency dynamics, with 21 of them expected to weaken
- Geopolitical economist Aly Khan Satchu opined that the Kenyan shilling could appreciate to 120 per unit versus the greenback
Japhet Ruto, a journalist at TUKO.co.ke, brings more than eight years of experience in finance, business, and technology, offering deep insights on economic trends in Kenya and globally.
The African Development Bank (AfDB) projects that in 2025, domestic economic constraints and geopolitical tensions will cause nearly half of Africa's currencies to depreciate versus the United States (US) dollar.
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Which African currencies will weaken/appreciate?
According to the Abidjan-based organisation's 2025 Africa Economic Outlook, 21 of the 54 African nations' currencies are expected to weaken this year.
However, the forecasted currency appreciation in 25 countries reflects a cautious but diverse assessment of the macroeconomic stability of the continent.
AfDB explained that financial market volatility brought on by rising global unpredictability may have an impact on African currency dynamics in the 2025/2026 financial year.
"Of the 54 African nations, 25 may record an increase in value relative to the US dollar in 2025, while 21 are predicted to experience a decline. The currencies of several nations, including Egypt, Ethiopia, Ghana, Libya, Nigeria, Rwanda, Zambia, and Zimbabwe, are predicted to depreciate by at least 6%," the multilateral development finance institution projected.
The African lender revealed that the Kenyan shilling and Moroccan dirham could appreciate by 3% or more in 2025.
"On the other hand, other nations, such as Kenya, Morocco, and those in the CFA franc zone, may see currency appreciation of over 3% against the US dollar," the report highlighted.
Why the Kenyan shilling will strengthen
Geopolitical economist Aly Khan Satchu opined that the Kenyan shilling could appreciate to 120 per unit versus the greenback.
However, he cautioned that the local currency is vulnerable to global shocks.
"The Kenya shilling’s muscular and extremely stable behaviour, particularly against the US dollar, is a conundrum wrapped up in a riddle. I suspect the Gulf Cooperation Council (GCC) support has been a big assist. However, we all know the shilling exhibits asymmetric behaviour. It could reach 120, but not 100 per unit," Satchu told TUKO.co.ke.
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Why Kenya's economy will record slow growth
In other news, the World Bank lowered its forecast for Kenya's GDP growth by 0.5% to 4.5% in its economic update, which was released on Tuesday, May 27.
The anticipated poor development of the economy is attributed to the huge debt, which has surpassed KSh 11 trillion.
Nevertheless, the Bretton Woods institution predicted that a stable exchange rate would help the economy recover and grow by 5% in 2026.
The World Bank suggested in the same report that Kenya cut the tax burden on middle- and low-income workers while raising the highest income tax rate for individuals making over KSh 800,000 to 38%.
Proofreading by Mercy Nyambura, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
