24/04/2025
Kenya Set to Overtake Ethiopia as East Africa’s Top Economy in 2025
Kenya is poised to surpass Ethiopia and become East Africa’s largest economy later this year, according to the International Monetary Fund (IMF). The IMF projects Kenya’s GDP to reach $132 billion in 2025, outpacing Ethiopia’s projected $117 billion.
The shift comes in the wake of Ethiopia’s July 2024 decision to liberalize its exchange rate regime, ending over five decades of strict currency controls. Since then, the Ethiopian birr has depreciated by more than 55% against the US dollar. The devaluation paved the way for a $3.4 billion IMF loan and $16.6 billion in financing from the World Bank, while also enabling the government to begin talks with creditors to restructure at least half of its $28.9 billion external debt.
Meanwhile, Kenya’s shilling has appreciated by around 21% in 2024, making it the world’s best-performing currency that year, according to the IMF. The currency’s strength was bolstered by a successful $1.5 billion Eurobond issuance in February, which boosted the country’s gross reserves. Additional support came from rising remittance inflows and export earnings.
Despite these external gains, Kenya still faces domestic economic challenges. A controversial fiscal reform plan aimed at increasing taxes and cutting the budget deficit sparked widespread protests in 2023, resulting in the deaths of at least 60 people. The government later reversed several measures, undermining fiscal targets under its $3.6 billion IMF-supported program, which was ultimately terminated early, costing the country around $850 million in expected disbursements.
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Kenya Set to Overtake Ethiopia as East Africa’s Top Economy in 2025
Kenya is poised to surpass Ethiopia and become East Africa’s largest economy later this year, according to the International Monetary Fund (IMF). The IMF projects Kenya’s GDP to reach $132 billion in 2025, outpacing Ethiopia’s projected $117 billion.
The shift comes in the wake of Ethiopia’s July 2024 decision to liberalize its exchange rate regime, ending over five decades of strict currency controls. Since then, the Ethiopian birr has depreciated by more than 55% against the US dollar. The devaluation paved the way for a $3.4 billion IMF loan and $16.6 billion in financing from the World Bank, while also enabling the government to begin talks with creditors to restructure at least half of its $28.9 billion external debt.
Meanwhile, Kenya’s shilling has appreciated by around 21% in 2024, making it the world’s best-performing currency that year, according to the IMF. The currency’s strength was bolstered by a successful $1.5 billion Eurobond issuance in February, which boosted the country’s gross reserves. Additional support came from rising remittance inflows and export earnings.
Despite these external gains, Kenya still faces domestic economic challenges. A controversial fiscal reform plan aimed at increasing taxes and cutting the budget deficit sparked widespread protests in 2023, resulting in the deaths of at least 60 people. The government later reversed several measures, undermining fiscal targets under its $3.6 billion IMF-supported program, which was ultimately terminated early, costing the country around $850 million in expected disbursements.
Source: Mark-Anthony Johnson
