International investors have retained a positive outlook on Kenya despite the economic challenges caused by the US-Israel war against Iran and the political risk of the upcoming general elections, global lender Citi says.
Citing activity by the lender’s global clients, Citibank NA Kenya chief executive officer Martin Mugambi told the Business Daily that corporate and portfolio investors did not cut their flows into Kenya in the first half of the year.
Since the start of the conflict in the Middle East at the end of February, global investors have largely shifted capital from emerging and frontier markets into safe-haven assets such as the US dollar and gold, fearing losses due to inflation.
Such capital flight tends to weaken local currencies against the dollar, in addition to raising risk sentiments on sovereign bonds issued by smaller economies.
In the case of Kenya, however, the shilling has remained stable in the period at about Sh129 to the dollar, while Kenya’s Eurobond yields have come down slightly compared to the beginning of this year.
‘When you look at where Kenya’s Eurobonds are trading, the yields have improved over the conflict period to between seven and eight percent. Investors are informed and have a wider view on the country’s debt, growth, fiscal challenges and vulnerabilities to geopolitical events,’ said Mr Mugambi.
‘There is still significant portfolio investment, and FDI flows into the Kenyan market by international investors. All else being equal, Kenya has retained a fairly reasonable attractiveness to international institutional investors.’
Two weeks ago, the United Nations Conference on Trade and Development (Unctad) published data on global Foreign Direct Investment (FDI) flows for 2025, showing that Kenya’s inflows rose by 37.7 percent, or $876 million (Sh113.2 billion), to a record $3.2 billion (Sh413.6 billion) in the year.
The agency said that multinational companies are channeling capital into Kenya’s digital infrastructure, artificial intelligence and selected renewable energy projects, amid business-friendly reforms and a stable currency.
This helped the country cement its position in recent years as East Africa’s fastest-growing investment destination despite a fierce global race for capital.
Ratings agencies have also softened their outlook on the Kenyan economy. Earlier this year, credit rating agency Moody’s upgraded Kenya’s long-term foreign currency sovereign credit rating to B3 from Caa1, citing lower near-term risk of debt default, higher forex reserves and a stable shilling.
Last week, fellow global agency Fitch affirmed Kenya’s long-term issuer default ratings at B- with a stable outlook. The agency noted that the Central Bank of Kenya (CBK) forex reserves buffers-now at a record $14.17 billion (Sh1.83 trillion) or six months’ import cover- have remained resilient in the face of heightened external pressures.
Mr Mugambi noted, however, that in contrast to external investors, local corporates are increasingly adopting a cautious approach to new investments as consumer demand remains constrained by inflation.
He added that corporate clients have also cited the approaching General Elections as a reason for a cautious approach to new investments, with some preferring to wait until the political noise eases before committing to significant expenditure.
‘There are still signs of distress since non-performing loans are still elevated at about 15.3 percent, and corporates are still under a fair amount of distress as cash flows are still weak,’ he said.
‘For us as a bank, we are struggling with these challenges in our client base, particularly corporates. We are seeing them sitting on the fence in terms of making large expenditures.’
Although growth in credit to the private sector has gone up in recent months to reach 9.3 percent in the 12 months to May 2026 from 5.9 percent in December 2025, it remains below the 12 to 15 percent level that is deemed ideal for healthy growth of the economy.
As a lender, Citi mainly caters to large corporate customers, giving the bank a wider view of investment inflows into and out of the country, and the borrowing and investment activity of Kenya’s larger corporate players.