Kenya-International Monetary Fund Talks Turn into a Shilling and Borrowing-Cost Story

By The COAST Reporter

Email, thecoastnewspaper@gmail.com

Domestic debt grew 17.0 percent faster than the 6.1 percent increase in external debt, thus 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 Fiscal Year 2025/26 indicates Kenya’s external public debt stock. This includes 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 Ksh501.3 billion by December 31, 2025 above the Ksh485.6 billion target.

In the week ending March 5, 2026, the treasury bill auction received bids worth Ksh100.4 billion against an advertised amount of Ksh24.0 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 International Monetary Fund (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.