The International Monetary Fund says Kenya will become East Africa's biggest economy next year, passing Ethiopia. The change comes after Ethiopia greatly lowered its currency value last July. The IMF predicts Kenya's economy will reach $132 billion in 2025, higher than Ethiopia's expected $117 billion. Ethiopia's currency drop helped unlock a $3.4 billion IMF loan package with extra support from the World Bank. The Ethiopian birr fell by more than 55 percent compared to foreign money.
Countries make their money worth less to sell more goods overseas, fix trade gaps, and manage debt. A cheaper currency makes exports cost less worldwide, helping businesses sell more products abroad. It also makes foreign goods cost more at home, pushing people to buy local products instead. The strategy can ease debt payment troubles for struggling nations. When money loses value, the real cost of paying back foreign loans decreases, giving countries some breathing room with creditors. But this approach carries risks like losing investor trust.
Devaluation means deliberately lowering how much a currency is worth compared to others. This works for countries that control their exchange rates as a tool to manage their economy. Making exports cheaper helps fix uneven trade between nations. Though strong money might look good, weaker currency can boost exports, create jobs, and lower trade deficits. South Korea used this method successfully during the 1970s with careful spending policies supporting growth. Brazil devalued its real currency in 1999 without causing major price increases, helping industry grow fast. Egypt also tried this in 2016, letting its pound drop 200 percent against other currencies.
Countries make their money worth less to sell more goods overseas, fix trade gaps, and manage debt. A cheaper currency makes exports cost less worldwide, helping businesses sell more products abroad. It also makes foreign goods cost more at home, pushing people to buy local products instead. The strategy can ease debt payment troubles for struggling nations. When money loses value, the real cost of paying back foreign loans decreases, giving countries some breathing room with creditors. But this approach carries risks like losing investor trust.
Devaluation means deliberately lowering how much a currency is worth compared to others. This works for countries that control their exchange rates as a tool to manage their economy. Making exports cheaper helps fix uneven trade between nations. Though strong money might look good, weaker currency can boost exports, create jobs, and lower trade deficits. South Korea used this method successfully during the 1970s with careful spending policies supporting growth. Brazil devalued its real currency in 1999 without causing major price increases, helping industry grow fast. Egypt also tried this in 2016, letting its pound drop 200 percent against other currencies.
