By Amin Brian
Nairobi, Kenya. Kenya’s economy continued to show resilience in the first half of 2025, with stable inflation, a robust agricultural sector, and growing investor confidence in capital markets, according to the latest Central Bank of Kenya (CBK) Weekly Bulletin released on July 4.
Headline inflation remained unchanged at 3.8% in both May and June, well within the CBK’s target range of 2.5%–7.5%.
Core inflation, which excludes volatile food and fuel prices, ticked up slightly to 3.0%, while non-core inflation rose to 6.2%, indicating moderate pressure from seasonal and energy-related costs.
The Kenyan economy is estimated to have grown by 4.9% in the first quarter of 2025, matching its performance during the same period last year.
Growth was driven by a strong performance in agriculture, which expanded by 6.0% on the back of favorable weather conditions, increased government investment in irrigation, and access to quality inputs.
Industrial activity also picked up, with sectors such as construction, manufacturing, and mining contributing to a 3.0% uptick, reversing the tepid growth seen in 2024.
However, the services sector, a key pillar of the economy, showed signs of fatigue, decelerating to 5.0% from 6.4% in the first quarter of 2024.
“The latest data confirms that Kenya’s economy remains broadly on track, supported by a stable macroeconomic environment and ongoing structural reforms,” said a John Muthuma, a Nairobi-based economist. “But the weakening services sector could drag growth in the second half if not addressed.”
In the foreign exchange market, the Kenya Shilling held firm, trading at KSh 129.24 to the US dollar as of July 3, showing little movement from the previous week.
Meanwhile, the country’s foreign exchange reserves rose to USD 11.09 billion, equivalent to 4.9 months of import cover, exceeding the statutory minimum.
Kenya’s money markets remained liquid, with commercial banks holding KSh 5.5 billion in excess reserves. The interbank lending rate eased to 9.67%, while the number of daily interbank deals fell sharply, suggesting a quieter short-term funding environment.
Investor appetite for government securities stayed robust. The July 3 Treasury bill auction recorded a performance rate of 90.9%, with interest rates on 91-day, 182-day, and 364-day bills remaining broadly stable.
At the Nairobi Securities Exchange (NSE), equities surged, with the Nairobi All Share Index (NASI) climbing 6.8% over the week. Market turnover soared by 189.3%, reflecting renewed investor interest amid easing inflation and a stable macroeconomic outlook.
Conversely, bond market activity declined, with secondary market turnover falling 40.1%, indicating a shift in focus to equities or caution ahead of future rate moves.
Globally, easing geopolitical tensions and steady U.S. economic data buoyed investor sentiment. Oil prices remained stable, with Murban crude trading at USD 68.09 per barrel, limiting external inflationary pressures on Kenya.
On the fiscal side, domestic debt rose to KSh 6.33 trillion, with Treasury bonds making up 83% of the total. Banking institutions remain the largest holders of domestic debt at 45.3%, followed by pension funds at 28.7%.
Economists caution that while macro fundamentals appear sound, Kenya must watch its rising public debt and ensure continued momentum in the services sector, which remains a critical driver of job creation and household income.
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