Kenya’s economy remains resilient but faces mounting risks from the escalating conflict in the Middle East, the National Treasury has warned, citing potential shocks to fuel prices, trade flows, and overall economic stability.
The Cabinet Secretary for the National Treasury John Mbadi when he appeared before the National Assembly Committee on Finance and Planning on Thursday, said the global environment had become increasingly uncertain due to geopolitical tensions.
“The global environment is rapidly evolving following the ongoing war in the Middle East, which has heightened geopolitical tensions and could pose additional risks to global growth through potential disruptions to energy markets, trade, and financial stability,” the CS said.
Despite the external pressures, the Treasury noted that Kenya’s economy remains on a steady growth path, with real GDP projected to expand by 5.3 percent in 2026 and 2027, up from 5.0 percent in 2025.
“Against this backdrop, Kenya’s economy remains resilient, with real GDP projected to grow at 5.3 percent in 2026 and 2027, up from 5.0 percent in 2025,” Mbadi said.
According to the ODM donated expert, Inflation has also remained stable within the Central Bank’s target band. “Inflation remained within the target band at 4.3 percent (February 2026), supported by easing food prices, and lower fuel costs,” the CS said.
However, the Treasury warned that the Middle East conflict poses significant risks, particularly due to Kenya’s heavy reliance on imported petroleum products.
“Petroleum imports account for approximately 20 percent of Kenya’s total import bill, underscoring significant exposure to global oil markets,” the CS noted.
Global oil prices have already surged due to the conflict. “Murban crude, Kenya’s key benchmark rose from an average of USD 63.06 per barrel in February 2026 to a peak above USD 116 per barrel by mid-March,” the CS said.
Mbadi said that although the country currently has adequate fuel stockshe has warned of looming price increases.
“While petroleum supply remains adequate in the short term, import for May and June are likely to reflect higher global prices, posing a significant risk of further increases in domestic pump prices with attendant inflationary and fiscal pressures,” the CS said.
The government has set aside funds to cushion consumers from rising fuel costs. “In FY 2025/26, the Fuel Stabilization Fund was allocated Sh25 billion, of which approximately Sh 16 billion is currently available,” the CS stated.
Beyond fuel, the conflict is expected to disrupt key export sectors, including tea and livestock. The Treasury revealed that Kenya’s tea exports heavily depend on Middle Eastern markets.
“In 2025, the region imported approximately 585 million kilograms of tea valued at USD 2.13 billion, of which Kenya supplied about 331 million kilograms valued at USD 983 million,” the CS said.
Livestock exports have already taken a hit. “Disruptions to these markets have led to an estimated revenue loss of about Sh250 billion per week, with Kenya’s six licensed export slaughterhouses operating at near-zero capacity,” the CS disclosed.
The broader economic outlook also points to rising inflationary pressures. “Rising oil prices are expected to exert upward pressure on inflation through higher fuel, transport, and production costs,” the CS said, warning that inflation could exceed 6.0 percent if high prices persist.
Revenue collection is also at risk due to the disruption in trade and economic activity. “Preliminary estimates suggest cumulative revenue losses of up to Sh60 billion, depending on the duration and severity of the shock,” the CS noted.
Kenya’s fiscal position remains constrained, limiting its ability to respond aggressively to the crisis. “Kenya’s fiscal position remains highly constrained, with a debt service-to-revenue ratio of about 67.1 percent, limiting scope for discretionary fiscal intervention,” the CS said.
To mitigate the risks, the government plans to diversify export markets, strengthen fuel price stabilization measures, and enhance foreign exchange reserves.
“The Government will continue to implement targeted, coordinated, and timely interventions to mitigate risks and safeguard macroeconomic stability,” the CS assured lawmakers.
The CS has conclusively emphasized the need for swift policy action to shield the economy from external shocks.
“Kenya’s economy remains resilient but exposed to significant external and domestic risks,” the CS said, adding that “timely and coordinated policy implementation will be critical to safeguarding economic stability and maintaining growth momentum in FY 2026/27.”
