- The IMF's October 2026 World Economic Outlook projected Kenya's inflation rising from 4.1% in 2025 to 6.0% in 2026
- Kenya's current account deficit widened to 4.5% of GDP as the country faced higher fuel and food import costs
- The IMF warned that lower-income households would bear the heaviest burden from rising food and energy prices
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Elijah Ntongai is an experienced editor at TUKO.co.ke, with more than four years in financial, business, labour and technology research and reporting. His work provides valuable insights into Kenyan, African, and global trends.
Kenya's households face growing financial pressure in 2026, with the International Monetary Fund projecting a significant rise in inflation and a wider gap in the country's external accounts, even as headline economic growth holds relatively steady.
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The IMF's October 2026 World Economic Outlook places Kenya's GDP growth at 4.5% this year, edging up to 4.7% in 2027 and roughly in line with the 4.6% estimated for 2025.
However, inflation is forecast to climb from 4.1% in 2025 to 6.0% in 2026 before easing to 5.0% the following year.
Simultaneously, the current account deficit, the shortfall between what Kenya earns from the rest of the world and what it pays out, is set to widen from 2.8% of GDP to 4.5% this year.
Middle East Conflict Drives Up Global Fuel Costs
The IMF links the global price surge primarily to disruptions stemming from the war in the Middle East.
Shipments through the Strait of Hormuz nearly ground to a halt earlier this year, affecting roughly a fifth of global oil supply and pushing crude prices to $126 a barrel in late March.
While crude has since pulled back, refined fuel prices remain between 70% and 95% above pre-war levels, the Fund found, with refinery outages in the Gulf and Russia removing approximately a fifth of the global refined fuel supply.
Diesel and petrol are bearing the sharpest pressure, a direct hit on Kenya's transport and food supply chains.
Global food prices are expected to rise 5.0% in 2026, the IMF added, warning that high fertiliser costs, export restrictions and extreme weather events, including the current El Niño, could sustain that pressure, particularly in lower-income countries.
Why Kenya Sits on the Difficult Side of the Global Divide
The IMF's report describes a world split between economies that are cushioned from the energy shock and those that are fully exposed to it.
Countries exporting oil or supplying components to the artificial intelligence hardware boom are faring better.
Energy importers with no foothold in that supply chain face what the Fund describes as the hardest combination: costlier imports, currency pressure, weakening real incomes and tightening budgets.
Kenya imports all of its fuel and earns no windfall from higher oil prices. The contrast with regional neighbour Nigeria is stark: Nigeria is projected to run a current account surplus of 7.0% of GDP this year, against Kenya's 4.5% deficit.
Source: Getty Images
Poorer Households Bear a Disproportionate Burden
The IMF found that lower-income households spend a larger share of their income on food, transport and energy, around 80% of consumption in the median low-income developing country, compared with roughly 70% for wealthier households.
A 6% national inflation figure may therefore significantly understate the effective cost-of-living increase facing families already spending most of their earnings on essentials.
The Fund's policy advice calls for targeted cash transfers rather than broad subsidies such as price caps or fuel tax relief, noting that blanket measures can require between 3 and 22 times the fiscal resources of directed support to achieve comparable protection.
It also urges governments to build the digital payment and national registry infrastructure needed to deliver help quickly before the next shock arrives.
For Kenya, the IMF's projections offer neither alarm nor reassurance. Growth remains on track, but the combination of a widening external deficit, higher import costs and 6% inflation leaves limited room for policy error.
Source: TUKO.co.ke