EBC Financial Group (“EBC”) says the latest
International Monetary Fund (IMF) engagement with Kenya may be read less as a
routine policy visit and more as a test of whether Kenya can keep external
funding pressure contained in the months ahead. An IMF staff team visited
Nairobi from 24 February to 4 March 2026 to advance technical discussions on
Kenya’s programme request, and the IMF said discussions with the authorities
will continue during the upcoming IMF-World Bank Group Spring Meetings.
That matters beyond policy circles because the market signals are already
visible. By 5 March, the shilling stood at KSh 129.20 per U.S. dollar from KSh
129.02 a week earlier, reserves were at US$14.597 billion or 6.2 months of
import cover, and yields on Kenya’s Eurobonds had risen by an average 51.41
basis points over the week.
“What matters here is how USD/KES, Kenya’s Eurobonds, and the local T-bill
and T-bond markets price Kenya’s access to dollars,” said David Barrett, Chief
Executive Officer, EBC Financial Group (UK) Ltd. “If confidence in Kenya’s
external financing path improves, the first signs may appear in a steadier
shilling, lower Eurobond yields, and less pressure on local-currency government
borrowing costs.”
Why This Cycle Looks Different from the Last One
This IMF mission did not produce a Board decision. The IMF’s own
end-of-mission note says the release reflects staff views and will not result in
a Board discussion. That makes this cycle different from the previous one. In
October 2024, the IMF Executive Board completed Kenya’s seventh and eighth
reviews and enabled a combined disbursement of about US$606 million. This time,
the immediate question is not how much new IMF money is arriving, but how Kenya
manages the payments already visible on its IMF calendar.
Kenya is scheduled to make a General Resources Account (GRA) repurchase under
the Extended Fund Facility (EFF) on 2 April, a Special Drawing Rights (SDR)
assessment on 30 April, and a much larger Poverty Reduction and Growth Trust
(PRGT) repayment under the Rapid Credit Facility (RCF) on 11 May. This is no
longer just a Kenya-IMF process story; it is a test of whether Kenya can move
deeper into a repayment phase without renewed pressure on the shilling, the
price it pays to borrow in dollars, and the cost of funding at home.
Where the Signal may Show Up First
The clearest first test is USD/KES, because that is where external dollar
demand shows up fastest. The second is Kenya’s Eurobond market, where
international investors reprice sovereign dollar risk in real time. The third is
the local T-bill and T-bond market, where pressure can spill over if external
funding conditions tighten.
Recent Central Bank of Kenya (CBK) data show why these three markets matter
together. By 5 March 2026, reserves had risen to US$14.597 billion, equal to 6.2
months of import cover, while the shilling remained near 129 per U.S. dollar.
Over the same week, the 2028, 2031, 2032, 2034 and 2048 Kenya Eurobonds were
yielding 6.36 percent, 7.46 percent, 7.67 percent, 8.60 percent and 9.31 percent
respectively.
Kenya Has Improved Its Debt Mix, but Not Removed the Dollar Question
Kenya has reduced one vulnerability by leaning more heavily on domestic
funding. The National Treasury’s Annual Public Debt Management Report shows
total public and publicly guaranteed debt at KSh 11,814.5 billion, or 67.8
percent of GDP, at the end of FY2024/25, up 11.7 percent from KSh 10,580.5
billion a year earlier. Domestic debt grew 17.0 percent, faster than the 6.1
percent increase in external debt, lifting the domestic share of total debt to
53.5 percent from 51.1 percent, while the external share fell to 46.5 percent
from 48.9 percent.
The external picture has not gone away as the National Treasury’s Second
Quarterly Economic and Budgetary Review for FY2025/26 shows Kenya’s external
public debt stock, including the international sovereign bond, rising to
US$42.34 billion at end-December 2025 from US$39.11 billion a year earlier. The
same review shows the current account deficit at US$3.2989 billion, or 2.4
percent of GDP, in December 2025, compared with US$1.55 billion, or 1.2 percent
of GDP, in December 2024. Goods exports rose 6.1 percent, but goods imports rose
faster at 9.1 percent, while remittances increased 1.9 percent to US$5.0368
billion.
Local funding also matters more than before. The same Treasury review shows
net domestic borrowing at KSh 501.3 billion by 31 December 2025, above the KSh
485.6 billion target. In the week ending 5 March, the Treasury bill auction
received bids worth KSh 100.4 billion against an advertised amount of KSh 24.0
billion. Read together, those figures suggest that if external financing
pressure rises again, it may not remain confined to FX or Eurobonds; it can also
feed into domestic financing conditions.
What Traders Can Watch Next
The next phase of Kenya’s IMF story can be read first through prices, not
headlines. If confidence in Kenya’s external financing path improves, that may
show up in a steadier USD/KES rate, tighter Eurobond yields and less upward
pressure on local government borrowing costs.
“A constructive IMF track would not remove Kenya’s external constraints,”
Barrett added. “But it could reduce the premium attached to Kenya’s access to
dollars. That matters not only to traders, but to anyone watching the shilling,
import costs and the government’s cost of borrowing.”
For traders following Kenya’s IMF path, the forex relevance goes beyond one
local headline. Through EBC’s forex offering, traders can monitor 37 currency
pairs and use EBC’s market coverage to track how country-level developments feed
into broader dollar demand and emerging-market FX conditions.
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