Kenya requests World Bank funds to cushion Iran war shocks

By Libby George and Duncan Miriri

Like other nations that are heavily reliant on energy imports, the East African country is scrambling to stave off shortages of essential commodities including petrol, while managing cost increases that could drive up inflation.

Kenya is the first larger emerging economy to publicly confirm a formal request to the World Bank, although a number of countries, such as Egypt, have said they have approached multilateral lenders.

IMF head Kristalina Georgieva said that at least 12 countries are seeking assistance from the Fund to cope with the crisis.

The request for funds was “significant”, Kenya’s central bank governor, Kamau Thugge, told Reuters on Thursday on the sidelines of the IMF World Bank spring meetings, without providing a figure.

Any help would be in addition to a budgetary support loan, known as development policy operations, that both sides were discussing before the outbreak of the crisis, he said.

Rapid Response Support is a term used by the World Bank for its fast-disbursing financial windows and policy support that helps countries respond quickly to shocks or crises.

In a sign of the risks facing Kenya’s public finances, President William Ruto signed a law on Friday cutting value-added tax on petroleum products to 8% from 13% for three months to cushion consumers from a surge in crude prices.

Last week, the central bank lowered its 2026 growth forecast to 5.3% from a previous projection of 5.5%, saying the Iran war posed risks to key sectors of East Africa’s biggest economy.

CLOSE EYE ON CURRENCY

Kenya’s shilling KES= weakened slightly at the peak of the fighting between the U.S. and Israel and Iran, but has since clawed back most of the losses, Thugge said.

“If there’s pressure …. definitely it will depreciate,” he said, adding that the central bank has enough reserves to curb volatility.

“What I would say is that depreciation will be orderly. The whole point about why we have been building these international reserves to where they are, to the highest levels, was precisely to be able to avoid excessive volatility.”

Hard-currency reserves at the central bank stand at above $13 billion, equivalent to 5.8 months’ worth of import cover.

Kenya’s central bank was pressing ahead with its plan to add gold to its reserves, Thugge said, adding that policymakers were studying domestic gold purchase models that have successfully been used by other countries.

Asked about future interest rate moves, Thugge said this would be determined by data in the run-up to June’s policy meeting.

The central bank paused its easing cycle at last week’s meeting, opting to hold rates to assess the impact of the oil price shock.

(Reporting by Libby George in Washington and Duncan Miriri in Nairobi, editing by Karin Strohecker, Kirsten Donovan and Alexander Smith)