The International Monetary Fund (IMF) projects that Kenya’s gross domestic product (GDP) will increase to $132 billion in 2024, surpassing Ethiopia’s anticipated $117 billion, which represents a significant economic achievement for the region. This change arises from differing monetary policies and economic conditions in the two neighboring nations.
Ethiopia’s choice to devalue its currency, the birr, by over 55% against the U.S. dollar last year significantly impacted the economic landscape. This steep devaluation, part of a strategy to liberalize the exchange rate, allowed Ethiopia to secure a $3.4 billion loan from the IMF and an additional $16.6 billion in support from the World Bank.
Furthermore, Ethiopia has begun talks to restructure at least half of its $28.9 billion external debt, as reported by Bloomberg. In contrast, Kenya has followed a different path, with its currency, the Kenyan shilling, appreciating by about 21% in 2024, making it the top-performing currency globally. Despite the expected economic advancement, Kenya faces considerable challenges.
President William Ruto’s administration has faced criticism due to controversial tax increases and measures aimed at reducing the deficit, leading to widespread protests in 2023 and raising concerns about the political viability of some economic reforms. Nonetheless, Kenya’s diverse economy, stable financial sector, and relatively robust monetary policy have contributed to its economic stability.
