The financial pulse of East Africa is beating with a mix of historic achievements, profound digital transformations, and critical institutional challenges. From Kenya’s record-breaking foreign exchange reserves to Tanzania’s surging digital payments and Uganda’s central bank navigating a period of intense scrutiny, recent developments highlight a dynamic and increasingly complex financial landscape across the region. These trends underscore the continent’s growing economic resilience, its embrace of technological innovation, and the ongoing efforts to strengthen governance and stability in its financial sectors.

Kenya’s Forex Reserves Hit an All-Time High: A Sign of Strengthening Resilience

Kenya’s official foreign exchange (forex) reserves, held by the Central Bank of Kenya (CBK), have surged to a historic high of $10.1 billion, marking a significant milestone for the East African economic powerhouse. This unprecedented level, first achieved in March 2025, was primarily buoyed by surplus funds that remained after international investors opted not to fully participate in the government’s $900 million Eurobond buyback offer.

Data released by the CBK reveals a remarkable increase of $913 million in a single week in March, pushing the total above the $10 billion mark for the first time in the nation’s history. The reserves had stood at $9.1 billion just the previous week. This unexpected windfall provides a substantial boost to Kenya’s economic stability and its capacity to manage external shocks.

The context for this surge lies in Kenya’s proactive debt management strategy. In March, the National Treasury floated a new $1.5 billion Eurobond, specifically aimed at refinancing part of its 2024 debt obligations through a buyback of an older $2 billion Eurobond, which was initially issued in 2014. Out of the $900 million that the Treasury had earmarked for this buyback, investors only agreed to sell back 64.4% of the bonds, amounting to $579.6 million. This left the government with an unplanned balance of approximately $320.4 million.

Initially, the Treasury had anticipated retaining only $597 million after the buyback. The higher-than-anticipated balance is now securely held within the CBK’s reserves. According to Treasury officials, these surplus funds will be strategically utilized to settle upcoming syndicated loan obligations that are falling due in April. This prudent management of debt and the unexpected boost to reserves significantly enhance Kenya’s short-term liquidity position.

Significance of Robust Forex Reserves:

The health of a country’s foreign exchange reserves is a critical indicator of its economic stability and its ability to withstand external pressures. With the latest reserve boost, Kenya’s forex cushion now represents 5.1 months of import cover. This figure is significantly above both the Central Bank’s internal minimum threshold of four months and the East African Community’s (EAC) statutory requirement of 4.5 months. Meeting and exceeding these benchmarks is crucial for several reasons:

• Import Cover: Adequate import cover ensures that a country can finance its essential imports (such as fuel, medicines, and industrial raw materials) even during periods of reduced foreign currency inflows. This prevents supply disruptions and supports domestic economic activity.
• Currency Stability: Strong forex reserves provide the Central Bank with the necessary firepower to intervene in the currency markets if the local currency experiences excessive volatility. By selling dollars from its reserves, the CBK can increase the supply of foreign currency, thereby supporting the Kenyan shilling and preventing sharp depreciations that could fuel inflation.
• Investor Confidence: A robust reserve position signals to international investors and creditors that a country has the capacity to meet its external debt obligations. This enhances investor confidence, potentially leading to lower borrowing costs for future government and corporate issuances, and attracting more foreign direct investment (FDI).
• Debt Servicing: For countries with significant external debt, like Kenya, ample forex reserves are vital for making timely debt repayments in foreign currency. This prevents defaults and maintains the country’s creditworthiness in international financial markets.

This marks a dramatic turnaround from 2023, when the CBK’s foreign reserves came under considerable strain. During that period, the apex bank frequently intervened in the currency markets, offloading dollars from its reserves to contain extreme volatility in the exchange rate. This volatility had been driven by a confluence of global economic pressures, including rising interest rates in developed markets, and increasing demand for foreign currency to service Kenya’s external debts. The Kenyan shilling had experienced significant depreciation, hitting its weakest point at KES 157 per USD in 2023.

Analysts widely agree that the sharp rise in reserves could significantly ease short-term pressure on the Kenyan shilling and help rebuild investor confidence. This is particularly crucial as the country continues to navigate a difficult fiscal environment marked by high debt servicing costs and persistent current account deficits. The shilling has shown impressive resilience, gaining 17.4% against the US dollar in 2024, climbing from KES 160 per dollar to around KES 132 by year-end, and remaining relatively stable in early 2025 at around KES 128-130 per dollar. This stability has been attributed to improved forex reserves, a surge in diaspora remittances (totaling $5.2 billion in 2024), a thriving agricultural export sector, and a narrowing current account deficit. The CBK’s prudent monetary policies, including selective interventions and adjustments to the Central Bank Rate (CBR), have also played a crucial role in maintaining currency stability and enhancing market liquidity.

The successful Eurobond buyback and the resulting forex windfall demonstrate Kenya’s proactive approach to debt management and its commitment to fiscal responsibility. This strategic move not only smooths out the country’s repayment obligations but also sends a positive signal to the global financial community, potentially paving the way for more favorable borrowing terms in the future.

Tanzania’s Digital Leap: ATM Decline Amidst Digital Payment Surge

In a clear reflection of evolving consumer behavior and the rapid advancement of financial technology, the total value of transactions conducted through Automated Teller Machines (ATMs) in Tanzania fell slightly in 2024. This decline underscores a steady and significant shift by consumers and businesses towards more convenient, cost-effective, and accessible digital payment channels.

According to the Bank of Tanzania’s (BoT) National Payment Systems Annual Report for 2024, ATM transactions dropped by 0.77% to $5.1 billion, down from the $5.2 billion recorded in 2023. The volume of ATM transactions also fell by 5.63% to 70.8 million, from 75.01 million the previous year. This decline occurred despite a notable increase in the number of ATMs installed across the country, which rose by 9.74% to 2,174 in 2024, compared to 1,981 the year before. The report further notes that ATMs remain heavily concentrated in urban centers, with Dar es Salaam accounting for the largest share at 33.07%, followed by Arusha (7.13%), Mwanza (6.07%), and Dodoma (5.57%). This urban concentration highlights the disparity in access to traditional banking infrastructure compared to the widespread reach of mobile networks.

The BoT explicitly attributed the overall decline in ATM usage to the growing adoption of alternative digital payment methods. These include:

• Mobile Money Platforms: Tanzania has one of the most vibrant mobile money ecosystems in Africa, allowing users to send, receive, and pay for goods and services using their mobile phones. This has revolutionized financial inclusion, particularly in rural areas where traditional banking services are scarce.
• Virtual Cards: The rise of virtual prepaid cards, linked to mobile money wallets, has provided a seamless way for users to conduct online and cross-border transactions without needing a physical bank card.
• Internet Banking Services: Increased internet penetration and smartphone adoption have driven the growth of online banking, offering a wide range of services from bill payments to fund transfers.

These digital alternatives offer distinct advantages, including greater flexibility, significantly reduced transaction costs, and 24/7 accessibility, making them increasingly attractive to a tech-savvy population.

As of 2024, the number of payment cards issued in Tanzania reached 12.72 million. Debit cards accounted for the vast majority at 97.05%, followed by prepaid cards (2.79%) and credit cards (0.16%). Visa, MasterCard, and UnionPay remained the leading international card brands in circulation, alongside other global networks such as American Express, Cirrus, and Maestro.

Interestingly, the number of local brand cards issued fell by 27.92% – from 2.40 million in 2023 to 1.73 million in 2024. This trend was largely driven by several interconnected factors:

• Growing Demand for Cross-Border Transactions: As e-commerce expands and international trade increases, consumers and businesses require payment solutions that facilitate seamless cross-border payments.
• Rapid Expansion of E-commerce: The rise of online shopping platforms, both domestic and international, necessitates digital payment methods.
• Increased Digitization of Merchant Payments: More businesses are adopting Point-of-Sale (POS) systems and QR code payments, further reducing the reliance on cash and traditional ATM withdrawals.
• Inherent Limitations of Local Cards and Mobile Money Systems in Handling International Payments: While mobile money is dominant for domestic transactions, international payments often require integration with global card networks or specialized virtual card solutions.

In response to these market dynamics, financial institutions and mobile network operators have ramped up the issuance of virtual prepaid cards, which allow users to fund transactions directly via their mobile money wallets. In 2024, virtual card registrations rose sharply by 60.37%, reaching 820,832 – up from 511,826 the previous year. These virtual cards processed a total of 4.51 million transactions in 2024. Of these, transactions denominated in Tanzanian shillings were valued at $220.15 million, while USD-denominated transactions totaled 0.6 million in volume, valued at $187.33 million. This highlights the growing use of digital channels for international transactions and the increasing dollarization of some digital payments.

The shift towards digital payments in Tanzania is part of a broader continental trend, often referred to as “leapfrogging” traditional banking infrastructure. This transformation is not only enhancing financial inclusion but also driving innovation in the fintech sector and contributing to the formalization of the economy.

Tanzania’s Remittance Boom: A Lifeline for Economic Growth

Remittance inflows into Tanzania surged by a remarkable 34.6% in 2024, reaching approximately $70 million. This significant increase underscores the growing contribution of the Tanzanian diaspora to the national economy, driven by concerted government efforts to streamline and reduce the cost of sending money through formal financial channels.

According to the 2024 Annual Report on National Payment Systems released by the Bank of Tanzania (BoT), the number of inbound remittance transactions rose by an impressive 40.5%, totaling 1.3 million. “The increase in remittances is partly due to policy measures that reduce transaction costs, enhance inclusivity, and make it easier for the diaspora to send money through formal channels,” the central bank stated in the report. These policy measures often include reducing fees on mobile money transfers, simplifying Know Your Customer (KYC) requirements for diaspora accounts, and promoting partnerships between local banks and global money transfer operators.

Remittances play a crucial role in the economies of many developing countries, including Tanzania. They serve as a vital source of foreign exchange, supporting the balance of payments and foreign reserves. More importantly, they directly contribute to household income, often used for essential consumption, education, healthcare, and investment in small businesses, thereby stimulating local economic activity and reducing poverty. Research has consistently shown a significant and positive relationship between remittance inflows and economic progress in Tanzania.

The report also highlighted growth in outward remittances. The number of transactions increased by 16.33%, while their value climbed 14.39%, to 148,274 transactions worth about $430 million. Despite this outflow, Tanzania registered a positive net remittance position, recording 1.2 million inbound transactions with a total value of around $271 million more than outbound flows. The majority of these funds originated from Tanzanians living in the United States, the UK, and Canada, reflecting the significant diaspora communities in these regions.

The report credited the increase to greater collaboration between local financial institutions and global Money Transfer Operators (MTOs) and remittance hubs, which enhanced accessibility and affordability. This includes partnerships with major players like Western Union, MoneyGram, and various online remittance platforms, making it easier for the diaspora to send money home securely and efficiently.

Electronic Money Institutions (EMIs) also played a key role in facilitating incoming remittances, showing a mixed trend. While the number of transactions declined by 4.23% to 3.4 million, the value increased by 8.60% to roughly $393 million, pointing to a shift toward higher-value transactions. This suggests that while more frequent, smaller transactions might be shifting to other digital channels, EMIs are increasingly being used for larger, more significant transfers.

Cross-border payments via the SWIFT system also recorded significant growth. Inbound transactions jumped 33.85% to 298,580, while the value rose 35.61% to approximately $12.14 billion, up from $8.95 billion in 2023. Outgoing SWIFT transactions grew even faster – up 73.70% in volume to 310,622 transactions. Their total value almost doubled, increasing by 86.52% to about $43.07 million, driven largely by growth in cross-border trade and the import and export of goods and services. SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized, and reliable environment. Its growth in Tanzania indicates increasing integration with the global financial system and a rise in formal international trade.

In the regional context, EMIs played a key role in supporting cross-border payments within the East African Community (EAC) and Southern African Development Community (SADC). Incoming regional transactions rose 45.48% in volume and 43.40% in value, reaching 4.32 million transactions worth roughly $194 million. Outgoing regional transactions also increased, up 38.68% in volume to 2.21 million and 31.99% in value to approximately $126 million. This highlights the growing economic integration and trade within regional blocs, facilitated by efficient digital payment systems.

People’s Bank of Zanzibar Sukuk Bond Finds Favour: Pioneering Islamic Finance for Development

The People’s Bank of Zanzibar (PBZ) is making significant strides in mobilizing domestic investment for national development through the launch of its newly introduced bond product, the Zanzibar Sukuk. PBZ is actively calling on Tanzanians to invest in this innovative financial instrument, positioning it as a tool for both individual empowerment and broader national progress.

Understanding Sukuk Bonds:

A Sukuk bond is an Islamic financial instrument structured in a way that complies with Islamic law (Shariah). Unlike conventional bonds, which represent a debt obligation and pay interest (riba, which is prohibited in Islam), Sukuk represents an undivided ownership interest in a tangible asset, a pool of assets, or a business venture. Instead of receiving interest, Sukuk investors receive a share of the profits generated by the underlying asset they own. This makes Sukuk a form of asset-backed or asset-based financing, where the returns are directly linked to the performance of real economic activities.

Key characteristics that differentiate Sukuk from conventional bonds include:

• Shariah Compliance: All aspects of the Sukuk issuance, from its structure to the underlying assets and profit distribution, must adhere to Islamic principles.
• Asset Backing: Sukuk must be backed by identifiable, tangible assets, projects, or services. This provides a direct link to real economic activity, fostering transparency and reducing speculative risk.
• Profit Sharing: Investors receive a share of the profits generated by the underlying assets, rather than a fixed interest payment. This aligns with the Islamic principle of risk-sharing.
• Risk Sharing: Both the issuer and the investor share in the risks and rewards of the underlying asset or venture.

PBZ Managing Director Arafat Haji highlighted the distinct advantages of the Zanzibar Sukuk, noting that the initiative stems directly from the visionary leadership of Zanzibar’s government, led by President Dr. Hussein Ali Mwinyi. The primary objective is to mobilize domestic investment for crucial development projects across the archipelago.

The Zanzibar Sukuk offers competitive annual profit rates: 10.5% in Tanzanian shillings and 4.2% in US dollars. These attractive rates make it a compelling option for both local investors within Tanzania and diaspora investors looking to contribute to their homeland’s development while earning a Shariah-compliant return.

“The purpose of this bond is to raise funds for key development projects in Zanzibar, including laboratories, airports, ports, and other infrastructure projects,” Haji stated. These investments are critical for enhancing Zanzibar’s economic capacity, improving public services, and boosting its tourism sector, which is a major driver of the local economy. For instance, upgrades to airports and ports will facilitate increased trade and tourism, while new laboratories could support healthcare or agricultural development.

Haji further added that profit payments will be disbursed every six months, providing regular returns to investors. Upon the bond’s maturity after seven years, investors will receive 100% of their original investment plus cumulative profits. The bond also offers a crucial element of flexibility: investors can use their bond certificates as collateral to access loans from other financial institutions, thereby unlocking additional opportunities for personal or business ventures. This feature enhances the liquidity and utility of the Sukuk, making it more appealing to a wider range of investors.

Dar es Salaam Mayor, Omary Kumbilamoto, echoed these sentiments, connecting the bond to broader economic progress under President Samia Suluhu Hassan, who he said is working to ensure Dar es Salaam functions as a 24-hour economy. This broader vision of economic dynamism and sustained growth provides a supportive backdrop for innovative financial instruments like the Zanzibar Sukuk, which aim to channel domestic savings into productive investments.

Stiff Task Ahead for Bank of Uganda’s New Governor: Restoring Trust and Navigating Volatility

The recent appointment of Dr. Michael Atingi-Ego as the new Governor of the Bank of Uganda (BoU) and Prof. Augustus Nuwagaba as his Deputy comes at a particularly critical moment for Uganda’s financial sector. While both leaders bring sterling academic and professional credentials to their top offices, they inherit an institution under intense scrutiny – not only for its internal governance but also for its crucial role in ensuring economic stability amidst an increasingly volatile global environment.

When the two new leaders stepped into office, the central bank was still grappling with the fallout from a major financial scandal that had severely dented its reputation. In September 2024, the Bank of Uganda made two erroneous transfers: one of $6.134 million meant for the World Bank and another of $8.596 million meant for the African Development Fund. Shockingly, these funds were instead wired to private companies: Roadway Company Limited via MUFG Bank in Japan, and MJS International in London, respectively.

The gravity of the situation quickly became apparent once the bank realized the payments had not reached the intended recipients. The BoU swiftly launched internal investigations and reported the incidents to the Uganda Police Force and the Financial Intelligence Authority. Swift action followed: working through its correspondent bank, Citibank N.A., the Bank of Uganda successfully recovered $8.205 million from the MJS International transaction, which has since been credited to the Consolidated Fund Account. Efforts to recover the remaining $391,660.45 from the Roadway Company Limited transaction are ongoing, highlighting the complexity and persistence required in such recovery efforts.

As Dr. Atingi-Ego and Prof. Nuwagaba take the reins, one of their immediate and most pressing tasks is to restore public confidence in the central bank’s integrity and operational robustness. This involves not only thoroughly investigating past mishandlings to ensure accountability but also implementing stringent improvements in verification processes for all future high-value transactions. Rebuilding trust will require transparent communication, demonstrable reforms, and a clear commitment to good governance.

Beyond the immediate scandal, the new leadership faces broader structural issues that continue to plague Uganda’s financial landscape:

• High Interest Rates: High interest rates remain a persistent complaint from borrowers across the country, impacting access to credit for businesses and individuals, and potentially stifling economic growth. The central bank’s monetary policy decisions will be crucial in balancing inflation control with the need to support economic activity through more affordable credit.
• Volatile Global Environment and External Debt Vulnerability: Uganda’s financial markets must navigate an increasingly unpredictable global environment. A significant concern is that between 12% to 15% of Uganda’s domestic debt is held by non-resident investors. This exposes the country to substantial risks from geopolitical shocks and global financial instabilities. If global interest rates rise sharply or investor sentiment shifts due to international crises, non-resident investors might rapidly pull out their funds, leading to capital flight, currency depreciation, and increased borrowing costs for the government. Managing these portfolio flows and maintaining investor confidence will be a delicate act for the new leadership.
• External Debt Burden: While the immediate focus is on domestic debt held by non-residents, Uganda also carries a significant external debt burden. Managing this debt sustainably, ensuring timely repayments, and avoiding debt distress will be a continuous challenge for the central bank in collaboration with the Ministry of Finance.

On a regional level, the central bank is also expected to take a lead role in fast-tracking the East African Monetary Union (EAMU). The EAMU is an ambitious goal of the East African Community (EAC) that aims to establish a single currency and harmonized financial markets across the region. This involves aligning monetary policies, financial regulations, and payment systems among member states. The Bank of Uganda’s role will be critical in driving this harmonization, ensuring that Uganda’s financial sector is prepared for greater regional integration and the eventual adoption of a common currency. This requires robust regulatory frameworks, strong oversight, and effective coordination with central banks in Kenya, Tanzania, Rwanda, Burundi, and South Sudan.

The appointment of Dr. Atingi-Ego and Prof. Nuwagaba signals a commitment to strong leadership at the BoU. Their success will hinge on their ability to address both the immediate governance challenges and the broader structural vulnerabilities, while strategically positioning Uganda’s financial sector for regional integration and sustainable growth in a volatile global economy.

Conclusion: A Continent in Financial Flux

The recent financial headlines from Kenya, Tanzania, and Uganda paint a vivid picture of a continent in dynamic flux. Kenya’s record forex reserves, driven by shrewd debt management, underscore the growing financial resilience of some African economies, offering a buffer against global volatility and boosting investor confidence. Tanzania’s embrace of digital payments and its surging remittance inflows highlight the transformative power of financial technology and diaspora engagement in driving inclusive growth and formalizing economic activity. Meanwhile, the challenges faced by the Bank of Uganda serve as a stark reminder of the critical importance of robust governance, transparency, and strategic foresight in central banking, especially in navigating complex global financial currents and pursuing ambitious regional integration goals.

Collectively, these developments illustrate Africa’s diverse economic trajectories and its increasing integration into the global financial system. The continent is not merely a recipient of aid but an active participant in shaping its financial future, leveraging innovation and strategic partnerships to build more resilient and prosperous economies. The ongoing efforts to strengthen financial infrastructure, enhance regulatory frameworks, and promote digital inclusion are crucial steps towards unlocking Africa’s full economic potential and ensuring a stable and prosperous future for its rapidly growing population. The narratives from these three East African nations offer valuable insights into the opportunities and challenges that define Africa’s evolving financial landscape.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

2nd July, 2025