As Kenya braces for Iran war fallout, CBK forex reserves hit Sh1.82t

The Central Bank of Kenya (CBK) has disclosed that the country’s foreign exchange reserves stand at a record $14.02 billion (Sh1.82 trillion), providing six months of import cover as the escalating Iran war threatens to unleash a fresh wave of external shocks on the local economy.

The unprecedented buffer, built on proceeds from a $2.25 billion (Sh292.5 billion) Eurobond issuance and the sale of a stake in the Kenya Pipeline Company (KPC), will face its sternest test yet as global oil prices breach $100 (Sh1,2900) per barrel and the closure of the Strait of Hormuz disrupts supply chains.

However, President William Ruto’s administration enters the crisis with a significant leg up, according to CBK data.

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Kenya’s import cover not only exceeds the central bank’s statutory requirement of four months but also comfortably surpasses the East African Community’s recommended benchmark of 4.5 months. CBK data released on Friday showed reserves rose to $14.022 billion (Sh1.82 trillion) as of March 26, more than double the crisis lows of early 2024.

Largest privatisation

Treasury officials attributed the buildup to the $820 million (Sh106 billion) raised from the KPC initial public offering, Kenya’s largest privatisation in nearly two decades, and the balance from a $2.25 billion dual-tranche Eurobond priced in February.

The Eurobond, comprising $900 million (Sh1.17 trillion) of 7.875 per cent notes due 2034 and $1.35 billion of 8.700 per cent notes due 2039, was heavily oversubscribed and partially refinances maturing obligations while smoothing the debt maturity profile.

The reserves are held primarily in US dollars, euros, and Japanese yen, serving as a financial safety net that the CBK can tap to stabilise the shilling and mitigate volatility, a function that may prove critical in coming weeks, analysts say.

“The foreign exchange reserves remained adequate at $14,022 million (six months of import cover) as of March 26. This meets CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover,” said CBK. “The Kenya Shilling remained broadly stable against major international and regional currencies during the week ending March 26, 2026.” Global tensions escalated after the closure of the Strait of Hormuz amid the war in Iran, pushing Murban crude oil price to $97.99 (Sh12,500) per barrel on March 26, up from $95.91 a week earlier.

For Kenya, a net oil importer, higher prices threaten to widen the current account deficit and put renewed pressure on the shilling.

The record reserves will also be crucial for government payments, including servicing external debts and funding essential imports such as medicines.

With external financing conditions tightening – yields on Kenya’s Eurobonds rose 15.08 basis points this week – the large buffer provides a cushion against sudden stops or capital outflows. Despite the dollar influx, the Kenyan shilling remained broadly stable, trading at 129.72 per dollar on March 26, marginally weaker from 129.52 a week earlier. The CBK noted the currency was stable against major international and regional currencies.

However, analysts caution that the reserve strength is partly seasonal and tied to specific inflows rather than structural export growth.

Kenyan exporters, from meat sellers and flower growers to horticultural producers, have announced losses running into billions of shillings following global supply chain disruptions linked to the Iran conflict.

The CBK’s Monetary Policy Committee (MPC) is scheduled to meet early next month against the backdrop of the escalating Middle East conflict. Analysts are watching closely to see whether the MPC will maintain its easing cycle or pivot to defend the shilling amid mounting imported inflation pressures.

Adequate import cover is vital for Kenya, which relies heavily on imports for a wide range of goods. It serves as a buffer against external shocks, ensuring the country can continue importing necessary goods without overly depleting its reserves.

A higher import cover indicates a more robust position, while a lower cover suggests vulnerability. The CBK reiterated that it stands ready to deploy the reserves to calm any disorderly market moves as geopolitical risks persist.