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Uhuru and the Kenya Shilling

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The Kenya shilling's performance during Uhuru Kenyatta's presidency (2013-2022) reflected broader economic vulnerabilities: persistent current account deficits, growing external debt, and an economy increasingly reliant on imports while struggling to expand exports. When Uhuru took office in April 2013, the shilling traded at approximately 84 to the US dollar. By the time he left office in September 2022, it had depreciated to around 120 to the dollar, a decline of roughly 43 percent. The depreciation accelerated in Uhuru's second term as debt servicing obligations intensified, import bills grew, and investor confidence weakened.

The shilling's weakness stemmed from structural imbalances in Kenya's economy. The current account deficit, driven by heavy imports of manufactured goods, fuel, and capital equipment, consistently exceeded 4-5 percent of GDP. Kenya imported far more than it exported, creating constant demand for foreign currency to pay for imports while foreign exchange earnings from exports, tourism, and remittances proved insufficient to cover the gap. The deficit was financed through borrowing and foreign investment, but when borrowing became expensive or investment flows slowed, pressure on the shilling intensified.

The import bill exploded during Uhuru's presidency, driven by infrastructure projects requiring imported capital goods (particularly for the Standard Gauge Railway and other Chinese-financed projects), rising fuel imports as Kenya's vehicle fleet grew, and persistent imports of manufactured consumer goods that Kenyan industry could not produce competitively. The Big Four Agenda's manufacturing pillar aimed to address this through import substitution, but progress was minimal. By 2022, Kenya was importing more than ever, and the economy's structural dependence on imports had, if anything, deepened.

Debt servicing obligations created additional pressure on the shilling. As Chinese loans, Eurobonds, and other external debt matured, Kenya needed dollars to repay or refinance. The country's external debt service costs grew from roughly KES 60 billion in 2013 to over KES 600 billion by 2022, a tenfold increase. Meeting these obligations required the Central Bank of Kenya (CBK) to supply dollars, draining foreign exchange reserves and weakening the shilling. The vicious cycle intensified in the second term: as the shilling weakened, the shilling-denominated cost of dollar debt increased, requiring more budget resources for debt service, further straining the currency.

The Central Bank's response oscillated between defending the shilling and allowing market depreciation. The CBK maintained foreign exchange reserves of roughly $7-9 billion during most of Uhuru's presidency, intervening periodically to smooth volatility. However, the reserves were barely adequate to cover 4-5 months of imports, below the recommended 6-month cushion. When depreciation pressure intensified, the CBK faced a dilemma: defend the shilling by selling dollars and depleting reserves, or allow depreciation and face higher inflation and debt servicing costs. The compromise was managed depreciation, allowing gradual weakening while intervening to prevent sharp drops.

Economic vulnerabilities of Uhuru's decade extended beyond the exchange rate. The economy grew at an average of around 4-5 percent annually, respectable but insufficient to absorb Kenya's rapidly growing labor force or achieve middle-income status. Inflation remained relatively controlled, averaging 5-6 percent, but periodic spikes (particularly in food prices during drought years) hurt ordinary Kenyans. Unemployment, particularly youth unemployment, remained stubbornly high despite infrastructure investment. The combination of weak shilling, rising cost of living, and limited job creation fueled political discontent, particularly among young Kenyans who formed the base of William Ruto's "hustler" movement.

The shilling's performance became politically significant during the 2022 election. Ruto attacked Uhuru's economic management, pointing to the weak shilling, high cost of living, and debt burden as evidence of failure. Uhuru's defenders argued that infrastructure investment required short-term pain for long-term gain, that the shilling's depreciation was modest compared to regional peers, and that global factors (COVID-19, Ukraine war, global commodity prices) explained much of the economic stress. However, for ordinary Kenyans buying maize flour or fuel, technical explanations mattered less than lived experience: the shilling bought less, life was more expensive, and Uhuru's economic legacy felt like struggle rather than prosperity.

See Also

Sources

  1. "Kenya Shilling Performance 2013-2022: Analysis and Trends," Central Bank of Kenya Reports. https://www.centralbank.go.ke/reports/exchange-rates/
  2. "The Kenyan Economy Under Uhuru Kenyatta: A Decade Review," Institute of Economic Affairs Kenya, 2022. https://www.ieakenya.or.ke/publications/kenyan-economy-uhuru-decade-review
  3. "Kenya's Current Account Deficit and External Debt: Implications for the Shilling," IMF Kenya Article IV Consultation, 2021. https://www.imf.org/en/Countries/KEN
  4. "Why the Kenyan Shilling Is Under Pressure," African Business, July 2022. https://african.business/2022/07/economy/why-kenyan-shilling-under-pressure

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