By Benadeta Mwaura - Reporter
Kenya, May 25 ,2026 - Treasury Cabinet Secretary John Mbadi has warned that continued pressure on the Kenyan shilling could further strain the national budget as foreign exchange volatility, rising import costs, and growing debt obligations intensify fiscal challenges.
Mbadi cautioned that Kenya’s economy remains highly exposed to global currency movements, particularly because key imports such as fuel and industrial inputs are largely dollar-denominated.
“If you do not have a reliable supplier you have a contract with, you cannot guarantee fuel supply. You may end up with a country dry,” Mbadi said while defending the current government-to-government fuel import framework.
The Treasury CS warned that disruption of existing import arrangements or further dollar scarcity could place severe pressure on the shilling, with exchange rates potentially weakening to between Sh160 and Sh180 against the US dollar under extreme scenarios.
Mbadi explained that the currency risk is closely tied to dollar demand within the import market, noting that fuel importation alone accounts for major foreign exchange outflows that must be carefully managed.
“If you liberalise fuel importation, the demand for dollars will be high, and that will strain the shilling,” he said.
His remarks come amid growing debate over Kenya’s fuel procurement model and broader concerns surrounding rising import bills at a time when the economy is already grappling with high debt servicing costs and narrowing fiscal space.
Mbadi said Kenya’s reliance on imported petroleum products leaves the economy vulnerable to external shocks, especially when global oil prices and logistics costs rise simultaneously.
He noted that rising landing costs and longer supply routes have already pushed import costs significantly higher, forcing government intervention through subsidies and tax adjustments aimed at cushioning consumers.
According to Treasury briefings, the government has spent billions of shillings on fuel subsidies and VAT adjustments to stabilize pump prices, even as fiscal pressure continues increasing.
Mbadi has previously warned that such interventions, while necessary, come at a cost to other budget priorities.
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“When we reduce taxes, it affects service delivery. We must be honest about that,” he said during earlier budget discussions.
The latest warning on the shilling adds to a series of cautionary signals from the Treasury highlighting tightening fiscal conditions driven by slower growth, weaker revenue performance, and rising debt repayments.
Analysts have also noted that Kenya’s heavy reliance on dollar-denominated debt and imports amplifies the impact of currency fluctuations, meaning any weakening of the shilling directly increases the cost of servicing external obligations.
Recent economic assessments show that while the shilling has experienced periods of relative stability, it remains vulnerable to external shocks including fuel price spikes, Eurobond repayments, and shifts in global investor sentiment.
Mbadi has defended government efforts to stabilize the currency, arguing that sudden depreciation would have wider consequences for inflation, transport costs, and household purchasing power.
“When inflation rises, people feel it immediately. Food becomes expensive, transport becomes costly, and businesses slow down,” he said during a recent economic briefing.
The Treasury now faces a delicate balancing act between supporting currency stability and managing limited fiscal space, rising debt obligations, and sustained pressure from import-heavy sectors.
Economists warn that continued dollar shortages or policy disruptions in fuel import arrangements could accelerate depreciation pressure and push the shilling into more vulnerable territory.
For now, Mbadi maintains that government interventions are aimed at preventing deeper instability rather than controlling the currency itself.
“This is not the time for emotional decisions. We must act based on facts and long-term stability,” he said.
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