Kenya has been advised to keep a firm grip on public spending and strengthen oversight in government institutions as the growing conflict in the Middle East threatens to disrupt global markets and energy supplies.
The caution came from the International Monetary Fund after its team met government officials in Nairobi and warned that the country must reinforce fiscal discipline to protect the economy from external shocks that could arise from the war involving the United States, Israel and Iran.
The IMF delegation held discussions with senior economic officials, stressing that strong budget management and an efficient public sector are necessary to shield Kenyans from possible increases in energy prices and interruptions in international trade.
The mission was led by Haimanot Teferra, who said the engagement with authorities examined the current economic outlook, policy actions and risks emerging from the situation in the Middle East.
“The IMF staff team engaged with the authorities on recent macroeconomic and policy developments and key risks, including potential spillovers from developments in the Middle East. Discussions highlighted the need to strengthen fiscal discipline, enhance fiscal credibility, and build resilience to external shocks,” Teferra said in a statement on Thursday.
“These efforts should be supported by strengthened governance and greater public sector efficiency.”
The consultations involved National Treasury Cabinet Secretary John Mbadi, Central Bank Governor Kamau Thugge, as well as representatives from various government departments, independent oversight institutions, civil society organisations, private sector actors and development partners.
According to the IMF team, developments in the Middle East present clear economic risks for countries that rely on imported fuel. One of the concerns raised was the possibility of disruptions around the Strait of Hormuz, a vital route used for transporting a large share of the world’s oil and gas.
The mission took place as tensions in the region escalated after coordinated strikes by the United States and Israel targeted Iranian sites, killing Supreme Leader Ali Khamenei together with other senior government figures. Iran later launched retaliatory attacks, increasing fears that the confrontation could spread across the region.
Kenyan exporters have already begun to feel the impact of the crisis. Meat exporters warned that the suspension of flights to the Middle East during Ramadan could result in losses estimated at Sh1 billion.
George Ouna, Director of the East African Tea Traders Association, also cautioned that Kenya may lose between 20 and 25 per cent of its tea market in the region if the conflict persists.
Apart from the geopolitical risks, the IMF staff mission also examined Kenya’s fiscal policies, broader economic outlook and key reform priorities. Technical talks on these matters are expected to continue during the IMF–World Bank Spring Meetings scheduled for April 2026.
Kenya’s outstanding obligations to the IMF currently stand at about SDR 2.8 billion, which is roughly Sh478.8 billion, while the country’s public debt remains close to 65 per cent of the gross domestic product. Efforts to reduce the budget deficit have faced delays in recent months after political pressure forced the government to drop several tax proposals from the Finance Bill 2024.
“The team thanks the authorities and other key stakeholders for their hospitality, candid engagement and support during the visit,” Teferra said.
Mbadi said matters relating to fiscal discipline and governance featured prominently during the discussions with the IMF team, adding that the visit was not meant to result in an immediate lending programme.
