IMF Predicts Kenya Will Lead East Africa’s Economic Pack in 2025
Nairobi, Kenya
Kenya is poised to reclaim its position as East Africa’s top economy, overtaking Ethiopia in 2025, according to a new economic outlook released by the International Monetary Fund (IMF). The forecast projects Kenya’s Gross Domestic Product (GDP) to rise to $132 billion (Ksh 17 trillion), while Ethiopia’s will slide to $117 billion amid significant currency depreciation and economic restructuring.
This transition marks a reversal from previous years where Ethiopia maintained dominance, with a GDP of $143 billion just last year. The IMF attributes this drastic shift largely to the sharp devaluation of the Ethiopian Birr, which plummeted over 55% against the U.S. dollar following liberalization of the exchange rate system in July.
Kenya’s Currency Strength and Export Surge Fuel Economic Rise
Kenya’s economic upswing is supported by a series of financial milestones. The Kenyan shilling recently earned the title of the best-performing currency globally, gaining 21% against the dollar in the past year. This strength was reinforced by the successful issuance of a $1.5 billion Eurobond in February, which expanded the country’s foreign reserves significantly.
In parallel, diaspora remittances reached record highs, with Kenyans abroad sending Ksh 651.7 billion ($4.94 billion) in 2024 — an 18% jump from the previous year. December alone brought in over $445 million, the largest monthly remittance ever recorded. The United States accounted for over half of these inflows.
Kenya’s merchandise exports also reached unprecedented levels, hitting $8.246 billion (Ksh 1 trillion) in 2024. July stood out as the strongest month for exports, largely propelled by growth in agriculture and manufacturing.
Policy Shocks, Protests, and Economic Reforms Present Challenges
Despite the economic momentum, Kenya’s journey hasn’t been without setbacks. The controversial Finance Bill 2024 sparked public protests and forced the government to reconsider its tax framework. This misstep disrupted the country’s commitment under a four-year, $3.6 billion IMF program, leading to its premature termination and forfeiture of $850 million in expected funding. Negotiations for a revised agreement are ongoing.
On the broader stage, the IMF has cautioned that Kenya’s economic progress could be tempered by global uncertainties. An emerging trade war, spearheaded by rising U.S. tariffs, may suppress global demand and disrupt supply chains. The IMF has already cut its global growth forecast to 2.8%, down from 3.3%.
In Sub-Saharan Africa, the expected GDP rise is modest — at just 3.8%, marking the region’s slowest growth since the pandemic-era slump of 2020.
As Kenya edges closer to the regional economic crown, the country’s resilience and adaptability stand out amid global economic turbulence. Whether this upward trend can be sustained in the long term will depend on Kenya’s ability to balance reform, investor confidence, and inclusive growth.
