When Kenyans hear that the shilling has strengthened against the US dollar, one question often follows: why are unga, fuel, rent and other household expenses still expensive?
The answer is that the exchange rate matters, but it is only one part of the economy.
The Kenyan shilling affects the cost of imports, foreign debt, travel, fuel and business operations. But food production, taxes, transport, wages, energy costs, interest rates and local demand also determine what consumers ultimately pay.
What does a strong or weak shilling mean?
If the exchange rate moves from KSh160 to KSh130 against the dollar, the shilling has strengthened because fewer shillings are needed to buy one dollar.
A weaker shilling means the opposite. If the rate moves from KSh130 to KSh160, importers need more shillings to purchase the same amount of foreign currency.
Kenya operates a flexible exchange-rate system. The Central Bank of Kenya does not target a particular shilling value but can intervene to stabilise the foreign-exchange market when there is excessive volatility.
As of September 10, the shilling was trading at about KSh129.45 to the dollar, showing the broad stability seen in recent months.
Why does the exchange rate affect prices?
Consider a Kenyan company importing goods worth US$10,000.
At KSh100 to the dollar, the goods would cost about KSh1 million before other charges. At KSh160, the same shipment would require KSh1.6 million.
That extra cost can eventually reach consumers through higher prices.
Fuel is particularly important because Kenya imports petroleum products. A weaker shilling can therefore increase the local cost of fuel even when the international oil price remains unchanged.
Higher fuel costs can then affect transport, farming, manufacturing and the movement of food and other goods.
Why hasn’t everything become cheaper?
This is where the exchange-rate debate becomes more complicated.
The price of unga, for example, depends not only on the shilling but also on maize production, weather, fertiliser, electricity, transport, storage, taxes and business margins.
The same applies to rent, school fees and other household expenses.
Kenya’s latest official inflation data illustrates the distinction. KNBS reported annual inflation of 6.5 per cent in July 2026, driven largely by food, transport and housing-related costs.
CBK later reported inflation at 6.6 per cent for August, while the shilling remained around KSh129 to the dollar.
A stable currency, therefore, does not mean prices automatically fall.
Who benefits when the shilling strengthens?
Importers generally benefit because they need fewer shillings to purchase foreign goods.
Families paying school fees abroad may also need less money to buy dollars or pounds. Businesses importing machinery, vehicles or electronics can similarly benefit.
The government can also benefit because foreign-currency debt becomes cheaper to service in shilling terms when the local currency is stronger.
But exporters can face the opposite effect.
A farmer earning US$10,000 from an overseas buyer receives KSh1.6 million when the exchange rate is KSh160, but only KSh1.3 million when it is KSh130.
This means a stronger shilling is not automatically good for everyone.
What really matters to households?
For most Kenyans, the most important issue is purchasing power — what their income can actually buy.
A salary can rise while a household becomes worse off if food, rent, transport, electricity and other expenses rise faster.
That is why the shilling should not be viewed as a standalone measure of economic wellbeing.
Kenya also needs higher productivity, stronger exports, affordable credit, stable food production, job creation and sustainable public finances.
The latest GDP figures show the economy grew by 5.3 per cent in the first quarter of 2026, up from 4.9 per cent a year earlier. But economic growth, like currency stability, does not automatically mean every household feels better off.
The bigger question is therefore not simply whether the shilling is strong.
It is whether a stable currency, controlled inflation, growing incomes, affordable credit and expanding employment are combining to improve the purchasing power and living standards of ordinary Kenyans.
