Kenya’s Central Bank sees minimal effects on the shilling from Trump’s aid freeze, citing strong remittance inflows and healthy reserves. The current foreign exchange reserves amount to roughly $9 billion, providing over four months of import cover. The Finance Minister voiced concern over the fiscal impact, while the central bank continues to lower interest rates to support economic growth.
Kenya’s Central Bank Governor, Kamau Thugge, reported on Thursday that the country does not anticipate significant impacts on its exchange rate due to U.S. President Donald Trump’s freeze on foreign aid. This freeze, initiated in late January, temporarily halts most development assistance while the Trump administration assesses the efficacy of aid and its alignment with foreign policy objectives. Thugge attributed maintaining healthy foreign exchange reserves, approximately $9 billion and exceeding four months of import coverage, to robust remittance inflows, enhancing the Kenyan shilling’s stability against the dollar.
In January 2025, the Trump administration undertook a foreign aid freeze affecting various nations, including Kenya. This action was part of a broader assessment aimed at evaluating the effectiveness of U.S. foreign aid. Kenya’s reliance on foreign assistance for various development projects makes this freeze a particular concern, although the Central Bank has currently managed to keep currency fluctuations minimal, aided by stable remittance streams and timely monetary policy adjustments.
Overall, while the foreign aid freeze could create fiscal vulnerabilities for Kenya, the Central Bank’s proactive measures and strong remittance support are mitigating immediate risks to the shilling’s value. As the country adapts to evolving financial conditions, it will require careful monitoring to assess the long-term impacts of U.S. foreign policy changes on its economy.
Original Source: money.usnews.com
