A rise in global oil prices linked to tensions in the Middle East has pushed up inflation in Kenya, with Treasury Cabinet Secretary John Mbadi reporting higher consumer prices even as he maintained that the overall economic outlook remains stable and within policy targets.
Presenting the 2026/27 Budget Statement in the National Assembly on Thursday, Mbadi said inflation climbed to 6.7 per cent in May 2026, up from 5.6 per cent in April and 3.8 per cent in May 2025, largely driven by increased energy costs.
"Overall inflation increased to 6.7 per cent in May 2026 from 5.6 per cent in April and from 3.8 per cent in May 2025 due to higher energy prices arising from the elevated global oil prices," he said.
He explained that the current inflation level remains within the government’s target band of 5 per cent, plus or minus 2.5 percentage points, and is expected to stay within range if global pressures ease and policy measures hold.
"Inflation is expected to remain within the target range in the near term, assuming de-escalation of the conflict in the Middle East and supported by appropriate monetary policy actions and government interventions," Mbadi told lawmakers.
Mbadi pointed to ongoing interventions aimed at shielding households from fuel-related shocks, including stabilisation measures introduced in April 2026.
"In April 2026, the government deployed targeted stabilisation measures to cushion consumers from the full impact of rising global fuel prices," Mbadi said.
Among the measures highlighted are the use of funds from the Petroleum Development Levy Fund to support pump price subsidies and a temporary reduction of Value Added Tax on petroleum products from 16 per cent to 8 per cent for a period of three months.
Despite the pressure from global markets, Mbadi said the economy has continued to perform steadily, recording average growth of 5 per cent between 2022 and 2025. This compares with a global average growth rate of 3.4 per cent and 4.1 per cent for Sub-Saharan Africa.
He further noted that the 2026 growth forecast has been adjusted downward to 5 per cent from an earlier projection of 5.3 per cent, citing the impact of the Middle East conflict on domestic activity. The economy is however projected to grow by 5.2 per cent in 2027.
On fiscal planning, the 2026/27 Budget estimates place total expenditure at about Sh4.8 trillion against revenues of approximately Sh3.6 trillion, resulting in a fiscal deficit of around Sh1.1 trillion, equivalent to 5.3 per cent of Gross Domestic Product.
Education received the largest share of allocations at Sh668.3 billion, followed by spending on national security and infrastructure as government seeks to balance spending pressures with efforts to stabilise public debt and support growth.