Category: Business Daily

Kenya has opted out of fully drawing a Sh193.8 billion ($1.5 billion) loan facility from the United Arab Emirates (UAE) due to its high pricing.

An official from the Treasury has indicated that the financing facility is now out of the picture, due to high costs as the country sees the scope for cheaper funds from institutions such as the World Bank.

Kenya already drew Sh64.6 billion ($500 million) from the facility in the last financial year but will now sit out of unlocking the Sh129.2 billion ($1 billion) balance.

The country reached an agreement with the UAE for the seven-year facility which is priced at an 8.25 percent interest rate and accessed a part of the funds in April 2025, amid prevailing high interest rates in international capital markets and the lack of concessional financing.

‘The $1 billion Abu Dhabi financing is out of the picture because of high pricing,’ the Treasury source told the Business Daily.

The UAE facility was previously seen as a lifeline for Kenya especially after the cancellation of the International Monetary Fund (IMF) multi-year programme in March 2025 and delays to fresh disbursements from the World Bank Development Policy Operations (DPO).

The loan arrangement was also reached at a point when international investors were demanding a steeper return to buy/hold Kenya’s debt at the pronouncement of US tariffs which caused jitters around the world.

Market access has since improved for Kenya including the international capital markets with Eurobonds yields sitting in the single digits’ territory.

Yields on the 10-year Eurobond maturing in 2028, the six-year 2031 Eurobond and the 12-year 2034 Eurobond closed last week below the 8.25 percent coupon rate for the UAE loan at 7.32 percent, 8.11 percent and 8.12 percent respectively as of Thursday April 16.

The UAE loan was the first commercial financing arrangement from the Gulf, with the government having previously relied on Eurobonds and syndicated loans, mostly from Western lenders, for commercial debt.

The UAE has had a growing influence in Kenya under the Kenya Kwanza administration, mainly through State-level business ties.

In March 2023, Kenya entered into a direct petroleum importation agreement with the UAE and Saudi Arabia, dubbed the government-to-government oil deal, at the height of a dollar crisis in the country.

The UAE also provided a private jet used by President William Ruto during his four-day State visit to the US in May 2024.

In May of the same year, the Gulf State pledged Sh245.4 billion ($1.9 billion in aid to Kenya to manage the effects of widespread flooding.

Previously, Treasury Cabinet Secretary John Mbadi said that Kenya was under no obligation to take up the balance of the UAE loan despite closer ties, insisting that the country would take up cheaper loan options if available.

‘We are not tied to one specific financing because of an arrangement. We will only take it if it makes economic sense,’ he said.

‘If the World Bank DPO is available, it would be at concessional rates. If we can also get debt for development swaps or Samurai bonds, these would also be better options.’

Kenya estimates its net external financing requirement for the fiscal year to June 30, 2026, at Sh225.8 billion or an estimated 1.2 percent of gross domestic product (GDP).

Net domestic financing is expected to fill the bulk of the 6.4 percent fiscal deficit at Sh998.6 billion or 5.3 percent of GDP.

The World Bank DPO financing is expected to play a significant role by providing the cheapest external financing option while also slightly putting checks on the relatively costlier domestic borrowing sources.

Kenya’s quest to speed up private sector credit growth to double-digits, for the first time since February 2024, now faces headwinds as fresh inflation and foreign exchange pressures pushed the Central Bank (CBK) to lean towards a cautious stance.

The country’s private sector credit has been on a recovery phase, gradually emerging from negative growth between December 2024 and February 2025 to reach a high of 8.1 percent in March 2026, marking 13 consecutive months of positive growth.

It has been two years and two months since the country posted double-digit growth of credit to the private sector, with the last time being February 2024, when it closed at 10.3 percent.

The recovery of private sector credit growth has been enabled by the CBK’s aggressive monetary easing cycle, which saw the benchmark rate fall from a high of 13 percent at the start of 2024 to the current 8.75 percent from April 8, 2026, a decline of 425.0 basis points aimed at boosting credit flow to the real economy.

This run now faces hiccups from rising inflation and geopolitical tensions that will force the CBK to re-draw its actions in the short term.

CBK Governor Kamau Thugge, says that after the apex bank’s latest pause on the benchmark rate at 8.75 percent in April, it will be keenly watching movements around inflation and foreign exchange to guide its decision in the June meeting.

‘The war introduces some complications. We have a situation where we have actually had to reduce our growth projection from 5.5 percent to 5.3 percent. We still believe there is more room for credit expansion and believe we should be able to get to double digits, but now have to watch what is happening with inflation and the exchange rate,’ he told Business Daily in an interview.

‘Since August 2024, we have been on an easing cycle because, in a sense, we had achieved our key mandate of stabilising prices, and the exchange rate was also stable,’ Dr Thugge says.

In particular, the CBK will keep close watch of the impact of the latest petroleum product price review on inflation. In the April 14 review, the price of super petrol and diesel were revised upward by Sh19.32 and Sh30.09 to Sh197.6 and Sh196.63 per litre, respectively.

Headline inflation closed March 2026 at 4.4 percent, with the non-core index, which tracks food and fuel, having risen to its highest point in three months at 10.8 percent, while the core index remained flat at 2.1 percent, pointing to relatively weak demand in the economy.

‘As we go to the Monetary Policy Committee meeting in June, one of the things we will be looking at will be what has happened with non-core inflation. Will the increase in fuel and transport inflation outweigh a potential decline in food inflation and therefore keep non-core inflation high? The core inflation, which has been stable, could also exhibit second-round effects from higher transport costs feeding in’, Dr Thugge says.

The CBK’s Monetary Policy Committee will also be keeping a close eye on the foreign exchange and the actions of major Central Banks such as the US Federal Reserve, the European Central Bank and the Bank of England to guide its decision.

On March 18, the US Federal Reserve held its benchmark interest rate unchanged, marking a swift departure from the three rate cuts that dominated its decisions in 2025. On March 19, the Bank of England also retained its benchmark rate at 3.75 percent, ending its stream of four rate cuts in 2025.

With Kenya’s foreign exchange reserves having come under pressure between March and April and declining from a peak of $14.6 billion (Sh1.9 trillion), translating to 6.2 months of import cover, to $13.3 billion (Sh1.7 trillion), translating to 5.6 months of import cover, CBK will be keen to guard against further pressure to limit potential capital outflows.

‘We will also be closely watching to see what the Central Banks in advanced economies will be doing with their interest rates. The last time we were slow in raising our interest rates, and we saw the impact of that on the exchange rate,’ Dr Thugge says.

Kenya has turned to the World Bank for additional funding to strengthen its external buffers and protect the Shilling’s stability in the wake of rapidly rising vulnerabilities following the US/Israel – Iran War.

This means that Kenya now expects to receive from the World Bank much more financing than the $750 million (Sh96 billion) loan that was factored into the 2025/26 budget at the start of the current financial year in June 2025.

CIC Insurance has paid Sh1.33billion to Co-operative Bank of Kenya as partial settlement of a multibillion-shillings loan extended to it by the lender, lowering its annual debt service burden. The paid amount was the proceeds of a land sale deal by CIC Insurance.

The insurer, which closed 2025 owing Co-op Sh4.92 billion, says it paid the Co-op Bank the Sh1.33 billion from the Sh1.8 billion it received in February this year from the partial sale of land in Kiambu and Kajiado. Co-op Bank owns a 24.82 percent stake in the insurer.

‘Subsequent to year-end, the group completed the sale of a portion of the secured land, and applied proceeds of approximately Sh1.33 billion towards repayment of the loan,’ said the insurer in the latest annual report.

The payment has cut the outstanding loan amount from the Sh4.92 billion it reported in its books at the end of December 2025. The reduction looks set to cut its loan servicing burden from the current over Sh500 million per year.

CIC spent Sh680.31 million on interest payments on the loan in 2025 and now eyes a reduced annual burden of debt servicing with the partial payment. The Sh1.33 billion repayments are equivalent to 27 percent of the outstanding loan, whose payment has been rescheduled several times.

CIC tapped the Co-op loan using the Kiambu land as collateral. The borrowing was at a fixed interest rate of 12 percent with a tenure of five years and was due for repayment on October 15, 2024. However, the repayment was pushed forward.

The loan was structured as a single draw-down with a bullet repayment of the principal sum at the end of the tenure, and also attracts interest repayment thrice a year.

CIC tapped the loan for repaying a Sh4.5 billion corporate bond. The loan is secured by 200 acres of land in Kiambu, which the insurer valued at Sh4.99 billion in its books at the end of December last year.

The insurer said it closed last year with deposits amounting to Sh719 million, which it received from potential buyers. CIC explained that the amount is held as payables until the revenue recognition criteria are met.

CIC had lagged on Co-op loan repayments, closing last year with principal instalments relating to two quarters.

‘The loan, therefore, had repayment delays on principal, although interest obligations were fully serviced during the year,’ said the insurer.

In 2024, CIC received an extension from Co-op Bank to reschedule the loan repayments by a month. The company received another extension to reschedule repayments by a further two months to mid-January 2025 after missing the initial timeline.

The two extension periods were to allow the parties to agree on the new restructuring terms for the loan repayment, as the sale of the Kiambu land was delayed.

CIC launched the process of selling the Kiambu land in November 2022. Delays in the process forced it to reschedule the loan.

The late Michael Jackson’s biopic ‘Michael’ is now out to harsh reviews from critics, yet very favourable ones from the fans.

The movie, officially announced as a work in progress on January 30, 2023, has been one of the most anticipated films of 2026. The buzz was further fueled by fans making a challenge to show up at the movies in their favourite ‘MJ’ look.

On Wednesday, I made my way to the cinemas to watch this film, in a replica Thriller jacket that I bought more than two months ago because I wasn’t sure about the shipping time, which had caused a rift between the experts of film and super fans who had caught the international premieres in Berlin and London.

But even before that, in the Jackson clan itself, there was some tension. Janet Jackson gave no input in the movie and refused to be portrayed.

She termed the film dishonest to Michael’s legacy after the initial drafts. And then at a private screening for the family last month, it is reported that she and brother Jermaine Jackson had a heated exchange in which he accused her of being jealous. Jermaine is Jafaar Jackson’s father, the actor who portrays Michael in the movie.

Michael’s daughter, Paris Jackson, didn’t approve of the film either. She said the biopic will make a lot of her father’s fans happy, saying ‘it panders to a specific section of her father’s fandom that still lives in a fantasy.’ She had sent some notes to the producers after reading the draft and they were ignored completely.

‘The thing about these biopics is, it’s fantasy world. They’re not real,’ she said in a story she put up in September 2025, adding, ‘The narrative is being controlled and there’s a lot of inaccuracies and full blown lies. At the end of the day, that doesn’t really fly with me. I don’t like dishonesty.’

Most of the critics’ argument for their low rating is that the film doesn’t even touch on the allegations of Michael Jackson’s abuse of children. To be fair, the timelines didn’t make any sense to bring that up.

The film Michael is a warm story about a boy who had insane vocal talent in the beginning. He truly loved to sing and perform, but his father, Joe Jackson, identified the talent of Michael and his siblings as a way out of his job as a crane operator in a steel mill trying to take care of nine children.

His method ended up working, but the beatings and hardline stances he took with his family meant that he pushed especially a sensitive Michael away from having a relationship with him.

At the first chance he could, Michael fired Joe as his manager. However, his father would find one more way to manipulate Michael into doing his bidding that would have an adverse and long-term effect on Michael’s life, up to his death.

I won’t be spoiling anything if I say this first part, the ending definitely indicates there will be a part two coming up. His story ends in 1988, just after the release of Bad album.

What stood out for me is Colman Domingo’s portrayal of Joe Jackson. Coleman acted with his eyes, his breathing and posture before he even said a word.

I had heard and read the stories about Joe being a sort of disciplinarian and very authoritative father to the Jackson siblings, but the way Colman played the character, I doubt there is anyone who walks out of that movie not believing that Joe Jackson was the devil himself.

It seems he got what he wanted in the end, creating a legacy for the Jackson name, but he was cruel, manipulative and also went behind the back of, especially Michael, to get to the dollar.

For all the praise that’s been heaped on Jafaar, I have to agree that he did play Michael really well. Let’s talk physical appearance first. There are points in the move when the lighting plays a trick on you for a split second. It’s like you see Michael Jackson and then it’s Jafaar playing him again.

The voice is spot on. And the constant rubbing of the knees that Michael would do during interviews to show his anxiety is shown in everyday situations, especially where he had to make impactful decisions. But he also shows the other side of a stern, sad and contemplative Michael.

The film also explores Michael’s relationship with his mother, Katherine. She is portrayed by actress Nia Long. She’s his comfort and encouragement. They watch a lot of TV together.

And that brings me to the criticism of the film. Her arc is interesting. There is a huge shift from who she is at the start and middle of the film, and then who she is in the third act when it pertains to her and Joe Jackson. But they say life is stranger than fiction.

Also, the film doesn’t really delve into the relationship of Michael and his siblings, except for a little bit with Latoya. Yes, the film is called Michael, but a lot more time was spent on the relationship with longtime security guard and close confidant Bill Bray (played by actor KeiLyn Durrel Jones) than the people he spent the first 40 minutes of the movie with.

Also, his quirks are not fully explained. The need to buy animals or toys are behaviours whose psychological basis are not well addressed. But then there are certain things, like philanthropy and speaking out for the marginalised, that we get to see.

But my biggest peeve with the film is the time it took when the music came on. Giving two minutes to a musical performance, in my opinion, took away time to flesh out a stronger storyline and more development of characters and the relationships. It felt excessive.

It is understandable why some people felt like they were more at a concert than the movie. Michael Jackson had done many documentary type productions on what went behind his moves, album creations and curation of performances that it didn’t really need that much delving into about how he would move on stage. Yes, many were iconic moments, but not all shots were essential to the story.

That said, Michael is still an enjoyable movie. It has scenes that will make you emotional, empathetic, want to hold your hand up at the screen and wring Joe’s neck, warm your heart up as Katherine and Michael interact, break out into dance or scream ‘woo!’ Or have you tensed.

Nearly 400,000 people living with HIV in Kenya did not receive a viral load test in the final quarter of 2025, new data shows, a gap that could allow undetected treatment failures to silently accumulate across the country’s antiretroviral programme.

Viral load testing measures the amount of HIV in a patient’s blood. A suppressed result, generally below 1,000 copies per millilitre, indicates that treatment is working and the risk of transmission is low.

An analysis of data from a report by the United States President’s Emergency Plan for Aids Relief (Pepfar) shows that of the 1.3 million people currently receiving antiretroviral therapy in Kenya, 928,229 (70.1 percent) had a documented viral load test during this period.

The remaining 395,923 patients had no recorded result, leaving clinicians without confirmation of viral suppression or early signals of treatment resistance. Among those tested, Kenya recorded a viral suppression rate of 97.4 percent, exceeding the UNAids global benchmark of 95 percent and national targets.

However, when measured across all 1.3 million patients currently on therapy, including the 395,923 patients with no recorded test results, the effective suppression rate falls to 68.3 percent, meaning that nearly one in three individuals lacks verified treatment outcomes.

Kenya is one of the countries that set a population viral load suppression target of 86 percent by September last year under the UNAids 95-95-95 framework. Current performance, measured across the full treatment population rather than among tested patients alone, indicates that the country remains below this threshold.

This shortfall is the direct result of the funding disruption that halted Pepfar’s operations last year. In January 2025, US President Donald Trump signed Executive Orders initiating a comprehensive review of overseas aid, resulting in an abrupt stop-work order that suspended Pepfar activities across its partner countries.

This was followed by a 90-day pause, after which core HIV treatment and prevention services were partially resumed.

In Kenya, viral load and early infant diagnosis products are mainly procured through Pepfar support. This means that the gap in testing coverage is also directly tied to the freeze on foreign assistance.

The Centre for Global Development estimated that approximately 65 percent of USAid- Pepfar awards were terminated, affecting support for 2.3 million people on treatment, nearly one-third of viral load testing services, and over one-third of new PrEP users.

An assessment by the Kenyan government, involving the Council of Governors, the National Syndemic Diseases Control Council (NSDCC), the National AIDS and STI Control Programme (Nascop), and the Kenya Medical Supplies Authority (Kemsa), found that reagents critical for measuring viral load suppression were among the supplies most adversely affected by the stop-work order.

The NSDCC and the Nascop subsequently warned in a joint document that, without urgent intervention, Kenya could see new HIV infections triple, rising from 16,752 to 58,495 per year.

Speaking as the freeze took effect, Director General of Health Patrick Amoth acknowledged the extent of Kenya’s exposure.

‘Kenya has made remarkable progress in the fight against HIV/Aids, with 98 percent of people living with HIV aware of their status and on treatment, and 94 percent achieving viral suppression. The ministry is actively engaging with other development partners and investing in local pharmaceutical manufacturing to prevent treatment disruptions,’ he said.

Despite this pressure, Kenya’s programme maintained continuity in treatment coverage, closing the quarter with 1.32 million patients on antiretroviral therapy-a 1.9 percent increase on the 1.29 million recorded two years prior.

This stability was attributed to ring-fenced funding for antiretroviral commodities and supply chain interventions that ensured the continued availability of drugs throughout the freeze.

The data shows that 1.29 million HIV tests were conducted during the quarter, yielding 16,057 new positive diagnoses at a positivity rate of 1.25 percent. Kenya has now diagnosed around 94 per cent of people living with HIV, approaching the first of the three UNAids targets.

However, with the remaining undiagnosed population concentrated in specific geographies and high-risk groups, the country is facing diminishing returns from broad-based testing strategies.

Public health specialists, therefore, recommended shifting towards index testing and expanding self-testing, particularly in high-burden counties such as Homa Bay, Siaya and Kisumu, as this is the most efficient way of closing the remaining diagnostic gap.

Globally, Pepfar-supported HIV testing declined by 21 percent in the same quarter compared to a year earlier, falling from 21.9 million to 17.2 million tests, while diagnoses dropped from 385,000 to 307,000.

In terms of prevention, new PrEP enrolments declined from 36,991 in the same quarter two years before to 35,258 the following year. Pepfar did not publish PrEP initiation data for the most recent quarter, creating a visibility gap at a time when prevention trends are of particular importance.

Across Pepfar-supported programmes globally, PrEP uptake fell by 37 percent in the first half of the reporting year, with adolescent girls and young women being disproportionately affected by any further contraction in prevention services.

Against these pressures, paediatric indicators offer one of the few genuinely positive signals. The number of children under 15 on treatment fell from 52,000 to 47,000 over the two-year comparison period-a decrease of 9.6 percent reflecting gains in the prevention of mother-to-child transmission rather than treatment attrition.

Residential property developer, Mi Vida Homes, has launched a Sh5.6 billion ($42 million) project in Tatu City, marking its entry into Kenya’s luxury housing segment.

The development, known as 156 Elara, will comprise 156 low-density townhouses on five acres.

“Our entry into the premium segment with 156 Elara is a deliberate evolution driven by market maturity and growing demand for low-density, high-quality homes,” said Samuel Kariuki, Mivida Homes, chief executive officer.

The project will have a range of housing units, including three-bedroom duplexes priced at Sh25.6 million and four-bedroom triplexes at Sh44.5 million.

“This strategic expansion positions us to deliver across affordable, mid-market, and luxury tiers over the next five years,” said Mr Kariuki.

Mi Vida said the move is driven by strong sales of high-end homes in the first quarter of 2026.

The project is located in Kiambu County, where satellite towns continue to attract real estate investment due to improved infrastructure and lower land costs.

Tatu City has grown into a key hub, drawing both homeowners and investors.

The development adds to Mi Vida’s projects in Kiambu, including Keza Laika, and supports expansion beyond its traditional focus on mid-market and affordable housing.

Stephen Jennings, founder and CEO of Rendeavour, the company behind Tatu City, said the project will expand housing options in the area.

“With partners such as Mi Vida Homes, we are expanding housing options to meet growing demand driven by migration from traditional urban centres and the rapid growth of Tatu City itself,” he said.

Tatu City currently hosts more than 7,000 residents, with growth expected as more families and businesses relocate.

Mi Vida has previously developed housing projects at Garden City and expanded to locations including Riruta and Ruaka.

The firm has been delivering affordable and mid-market housing, targeting Kenya’s growing middle class with units priced below the luxury bracket while still offering modern amenities and planned-community living.

The company was earlier backed by Actis and Shapoorji Pallonji Kenya, which exited the investment, leaving the developer under local ownership.

The prices of several models of imported second-hand vehicles have risen as high as Sh429,000 due to the controversial computation of import duty, hitting buyers who are now forced to dig deeper into their pockets.

For example, the cost of a Honda Insight 2019 model with a 1500cc engine has jumped to Sh2.6 million from an average of Sh2.2 million, after its duty charge rose to Sh791,000 from Sh362,000.

A 2019 model of the 1200cc electric Nissan Note is now going for an average of Sh1.4 million from Sh1.15 million, after taxes on the unit rose by Sh210,000 to Sh448,000.

Dealers say that new taxes that the Kenya Revenue Authority (KRA) is charging are clouded in secrecy, adding that most of the affected vehicles are not captured in the vehicle price list published in 2019, and which forms the basis of computing taxes for imported used vehicles.

The surge in duties has hit buyers and dealers, triggering slow sales.

The contested computation of the taxes comes at a time when KRA is barred from enforcing the new list that forms the basis of computing taxes (Current Retail Selling Price).

‘You bring a vehicle like a 1000cc Toyota Passo expecting to pay duty of Sh220,000, but then KRA tells you that it is Sh282,000. The small engine models, whose popularity is fast rising, are the most affected,’ Charles Munyori, Secretary General of industry lobby, Kenya Auto Bazaar Association, said.

Most of the affected cars have, over the years, become popular, especially among ride-hailing operators like Uber and Bolt, and the middle class, largely due to their affordability and small engines.

The price of a Toyota Raize 2019 model, with a 1000cc engine, has jumped to an average of Sh2.65 million from Sh2.35 million, mirroring the Sh245,000 rise in duty to Sh518,000.

Duty on an imported used Nissan Dayz 2019 model with an engine of 660cc has jumped by Sh92,000 to Sh247,000, pushing its car-yard price to an average of Sh980,000 from Sh850,000.

‘If a car model is not in the CRSP of 2029, then KRA is mainly using the manufacturer’s retail price in the source market. This has the impact of significantly increasing prices of the cars whose prices went up in the country of origin,’ added another dealer who sought anonymity.

KRA had not responded to queries on the matter, which has since sparked uproar as dealers grappled with reduced orders and increased costs of doing business.

The High Court last year barred KRA from enforcing a new CRSP until the hearing and determination of a case where dealers sued the taxman for lack of sufficient public participation in coming up with the new CRSP.

The new CRSP was to take effect from July 1, 2025, and would have seen prices of some imported used vehicles jump by upwards of 145 percent.

KRA charges five taxes on imported second-hand vehicles. These are import duty of 35 percent, excise duty of between 20-35 percent based on the engine size, and Value Added Tax of 16 percent.

The units also attract an Import declaration fee of 2.5 percent of the customs value and a railway development levy of two percent of the customs value in each case.

The uncertainty arising from disruptions in the flow of goods through the Strait of Hormuz has finally reached Kenya in the form of ‘tail risks.’ Although we all quietly expected it, the announcement of a sharp rise in fuel prices mid this month has still come as a shock.

Economists describe the current situation as a ‘tail risk’ because most models did not anticipate that the blockage of such a narrow waterway would occur, or, if it did, that it would have such far-reaching consequences for global supply chains and financial markets.

Before this war began, few people were familiar with terms like ‘Strait’ or ‘Hormuz.’ Today, phrases such as ‘blocking of the Strait of Hormuz’ have become part of everyday conversation.

Just this week, I overheard someone jokingly threaten to block another person’s ‘Strait of Hormuz.’ I did not follow up to understand what they meant, but the reference itself reflects how quickly global events have entered local discourse.

Beyond the terminology, what we will feel most are the economic consequences arising from the current situation. While the transmission of this shock was initially delayed by the Energy and Petroleum Regulatory Authority (Epra) statutory pricing regime, fuel costs have now caught up with global market prices.

For other cost-areas outside Epra, the effects of this tail risk now have no ‘delayer’.

Transport costs are expected to quickly rise, increasing the cost of moving goods across the country. Manufacturers and farmers, facing higher transport and production expenses, will pass these costs on to consumers.

Ultimately, the costs of goods in supermarket shelves will shortly increase. The result is broad-based, persistent, and systemic cost-push inflation.

In the real economy, consider large corporates with sufficient capital buffers in sectors such as transport, logistics, agriculture, and manufacturing, but which heavily dependent on fuel.

Even if they initially resist raising prices, increased operating costs will quickly erode profitability and capital, potentially pushing them out of business. The rational response, regardless of firm size, is to adjust prices accordingly.

Unlike demand-push inflation, which can be managed through interest rate adjustments, cost-push inflation creates a difficult trade-off between controlling inflation and supporting economic growth.

Raising interest rates may help stabilise prices but risks slowing growth by making borrowing more expensive. Conversely, keeping rates low may support growth but risks weakening the currency and amplifying imported inflation.

On the exchange rate front, higher oil prices have increased Kenya’s import bill, widening the current account deficit. This continues to put downward pressure on the Kenyan shilling. A weaker currency, in turn, makes imports more expensive, reinforcing inflationary pressures.

Rising fuel and food prices are also eroding household disposable income, forcing consumers to prioritise essential spending. As incomes shrink, less money is available for loan repayments. Micro, small, and medium enterprises, particularly those in non-essential sectors, are likely to be among the hardest hit due to declining sales.

As prices rise across the board, demand will likely decline. Reduced demand leads to lower output, delayed investments, and eventually layoffs. Job losses then hitback and reduce household income, further increasing credit risk across the economy.

As incomes fall, borrowers’ credit profiles deteriorate, increasing their probability of default. Under risk-based pricing frameworks, this leads to higher interest rates, which in turn raise loan repayment burdens and further strain household and business finances.

Lenders, facing elevated credit risk, will need to increase provisions, limiting their capacity to extend additional credit to the market.

This is how a geopolitical conflict thousands of kilometres away ultimately imports risks which eventually affects everyone.

Are there other tail risks ahead? No one knows. What is clear, however, is that the impact of Strait of Hormuz disruption on inflation, and the resulting pressure on the broader financial system requires urgent attention.

Motorists are grappling with an inconsistent supply of fuel in the wake of smaller cargo deliveries at the Mombasa port and cash-flow woes facing oil marketers.

A spot-check in Nairobi revealed that several retail outlets owned by majors such as Vivo Energy and Rubis Energie Kenya have been grappling with stock-outs over the past week, with diesel being the most affected.

Oil executives say that smaller cargoes, mainly of diesel since last month have forced oil marketers to share smaller volumes of fuel, reducing the number of days the stocks can last before the next shipment.

For example, diesel cargoes of between 85,000 tonnes and 100,000 tonnes are traditionally delivered at the port of Mombasa. But disruptions due to the US-Israel war on Iran have forced the country to ship in products using smaller vessels, some with a capacity as low as 37,000 tonnes.

‘Most of us do not have enough product. We normally receive big vessels for diesel, but the Middle East disruptions in the global market have forced us to get smaller ones. These hitches will persist up to around early next month when hopefully, the big vessels will come,’ said one of the executives.

‘Our cargoes for diesel are traditionally big, like 85,000 tonnes, but now we are getting vessels of 37,000 tonnes. These small vessels cannot meet our needs, and we are in a situation where much of these are going straight to the pump.’

The war, which broke out in February this year, disrupted global fuel supply chains notably through the closure of the critical Strait of Hormuz and attacks on refineries in the Gulf region.

Besides smaller cargoes, a steep subsidy of Sh23.92 and Sh108.10 per litre of diesel and kerosene, respectively, applied in the monthly cycle ending May 14, 2026, means that marketers have to wait longer for the Sh6.2 billion compensation further hurting their cash flows.

Most oil marketers started experiencing supply hitches early last month after a vessel carrying petrol was stranded at the Port of Jebel Ali in Dubai due to Iran’s blockade of the Strait of Hormuz.

The ship carried 60,000 tonnes, and its inability to deliver the product in Mombasa forced Kenya to seek alternatives to plug the gap and avert a crisis.

‘Vivo Energy has been operating at very thin PMS (petrol) stock (hand to mouth). Due to the current supply uncertainty, we have experienced increased uplift from our retail sites, which has made the situation worse,’ Vivo Energy CEO, Peter Murungi, had said in a letter to the Ministry of Energy Petroleum on March 12, 2026.

Another executive said the big companies are now pushing most of the product to their retail outlets and reducing the volumes available for the small independents in the wholesale market.

Additionally, costly fuel means that most of the dealers for the big marketers are getting less volumes for the same amount of money (credit limits). These stocks last fewer days, and delays in getting fresh deliveries trigger the inconsistent supply.

‘Due to the higher prices of the product, big marketers would rather push more product to their retail stations instead of selling in the wholesale market and waiting for the government subsidy,’ said the executive.

Sources in the industry say big oil marketers have shunned small independent firms and pushed much of their product to their retail outlets in a bid to ease the impact of the subsidy.

Small independent firms own most of the retail outlets outside the major cities, and buy their fuel from the oil majors at subsidised wholesale prices.

Several dealers, contracted by oil majors have also been hit, given that the costly fuel translates to reduced volumes based on their credit limits.

‘Most of the majors operate via the dealership model, and these dealers have credit limits. For example, a dealer with a credit limit of Sh10 million worth of fuel will now get less product because the prices have gone up, but the credit limit is unchanged,’ said an executive.

The cost of fuel that was imported into the country last month was significantly high, pushing oil marketers to spend more to get the product. This has been exacerbated by the steep subsidy that the government has yet to pay them.

Average landed cost (price of product and transport costs) of kerosene skyrocketed by 105.15 percent to $1,311.93 (Sh170,655.85) per cubic metre last month, while a similar quantity of diesel jumped by 68.72 percent to $1,073.82 (Sh139,682.50).

The cost of petrol went up by 41.53 percent to $823.87 (Sh107,169) per cubic metre last month, underscoring the impact of the US-Iran war on global markets.

The Middle East conflict has put pressure on Kenya’s fuel importation structures, forcing the government to seek emergency supplies to avert a crisis.

Kenya imports fuel under a government-backed deal with Saudi Aramco Trading Fujairah, Abu Dhabi’s ADNOC Global Trading Ltd, and Emirates National Oil Company Singapore Ltd.

The fuel is imported on a credit period of 180 days. The three oil majors handpicked a number of local oil marketers to ship the fuel on behalf of the country.

During a recent forum, the CEO of the Retirement Benefits Authority, Charles Machira, set out a clear direction for the pensions industry.

He highlighted priorities that will shape the next phase: innovation with safeguards, expanding coverage, using pension funds to support economic growth, and improving outcomes for members. At the centre of this shift are trustees.

These priorities come at a time when pension assets stand at nearly Sh2.81 trillion. But growth alone is not success when the coverage gap remains Kenya’s biggest challenge. Only about a quarter of Kenya’s workforce is covered by a pension scheme, leaving the majority without structured retirement savings, especially in the informal sector, which accounts for over 80 percent of employment.

This is where the next phase of the sector must focus: expanding access while improving outcomes. Kenya has already shown how innovation can expand access. Mobile money transformed financial inclusion. Today, micro-pension products and digital platforms are extending retirement savings to informal sector workers such as boda boda riders, traders, and small business owners.

But as we adopt innovation, it must be practical. Trustees must ensure these products are simple, affordable, and built for long-term savings. Without this, adoption will remain low.

As coverage expands, the question of returns becomes crucial. Today, pension portfolios remain heavily weighted toward traditional assets. Over 90 percent of funds are still invested in government securities, equities, guaranteed funds, and property. Government securities alone account for more than half of total assets.

While this has provided stability, it also limits growth. Encouragingly, there is a gradual shift. Allocations to private equity, corporate bonds, and other alternative assets are increasing, offering the potential for stronger long-term returns.

This is where trustees play a decisive role to strike the right balance between stability and growth. Too much conservatism erodes value over time, especially in an inflationary environment. Poorly assessed risk, on the other hand, can lead to losses.

The third priority is that as pension funds serve members, they must also serve the economy. Kenya faces an annual infrastructure financing gap exceeding Sh330 billion, pension funds have the assets. We are already seeing pension capital financing infrastructure, real estate, and businesses that create jobs. These investments are shaping Kenya’s development while generating returns for members.

But they must be approached carefully. Trustees must ensure that every allocation is justified, well-structured, and aligned to long-term obligations. The goal is not to follow trends, but to make decisions that improve outcomes for members.

Ultimately, the purpose of a pension system is to provide security in retirement. For many Kenyans, the biggest risks are rising healthcare costs and longer life expectancy. Savings that appear adequate can quickly diminish. Solutions such as post-retirement medical funds and more flexible savings structures are therefore critical, but only if they are well implemented.

Trustees must move beyond a compliance-driven approach and take full responsibility for member outcomes.

It is no longer sufficient to meet regulatory requirements; they must ensure that members are saving enough and that investments deliver consistent performance over time.

This calls for stronger capability, active oversight, and the confidence to challenge decisions to ensure products remain relevant and risks are effectively managed.

The next phase of the pension sector will be defined by whether trustees can expand access, invest more strategically, and focus on delivering meaningful retirement outcomes. Their actions will determine whether the sector fulfills its promise or leaves many Kenyans without adequate support in retirement.