CBK explains why Kenya shilling has remained stable despite Middle East conflict
By Kenneth Mwenda, July 14, 2026The Central Bank of Kenya (CBK) is confident that the Kenya shilling will remain stable despite growing pressure from the conflict in the Middle East, with Governor Kamau Thugge saying strong foreign exchange inflows and healthy reserves have strengthened the country’s ability to absorb external shocks.
Speaking during the 23rd East African Banking School Conference on Tuesday, July 14, 2026, Thugge explained why the shilling has remained within a narrow trading range for more than two years, even as global events disrupted trade, oil markets and remittance flows.
The governor said the shilling has remained relatively stable since March 2024, trading between Kh120 and Ksh130 against the US dollar.
“I know a lot of people wonder how we’ve been able to maintain a stable exchange rate for such a long time,” Thugge said.
“Indeed, it has been steady since early 2024. It has fluctuated between 120 and 130.”
The governor noted that the currency briefly weakened to around Ksh130 per dollar after the conflict involving Israel, the United States and Iran intensified, increasing uncertainty in global financial markets and putting pressure on Kenya’s foreign exchange market.
Middle East conflict affected Kenya
Thugge said Kenya had expected its current account deficit to widen this year because of disruptions caused by the conflict in the Gulf region.
According to the CBK governor, around 10 per cent of Kenya’s remittances, equivalent to about $500 million (around Ksh64.5 billion), come from Gulf countries. At the same time, just under 10 per cent of Kenya’s exports are destined for the region.
The disruption to trade and remittance flows has therefore affected Kenya’s external accounts more than initially projected.
“This year, we had expected a widening of the current account deficit,” Thugge said.
“We get about 10 per cent of our remittances from the Gulf area. That’s about $500 million. We also export quite a bit to the Gulf area… and of course that has been disrupted.”
Despite these challenges, the governor said Kenya has continued to receive enough foreign currency inflows to offset the pressure.
Foreign investment supporting the shilling
Thugge attributed the stable exchange rate to strong financial inflows from foreign direct investment, multilateral lenders and strategic investments.
He revealed that the country’s foreign exchange reserves had recently increased following financing from the World Bank.
Over the past two weeks, Kenya’s reserves rose by about $954 million to $14.1 billion, equivalent to about six months of import cover, largely supported by approximately $750 million (Ksh97.12 billion) in World Bank financing.
The governor added that further inflows are expected from the recently announced Safaricom transaction, Kenya Pipeline Company (KPC)-related investment and Nedbank’s investment in NCBA.
“We’ve seen the money from the Safaricom transaction. It’s yet to hit our reserves position, but I think it’s just about to,” Thugge said.
“That will take us to almost $16 billion, almost seven months of import cover.”
Once those inflows are reflected in the reserves, Kenya will have one of its strongest external buffers in recent years.
According to Thugge, the CBK expects Kenya’s balance of payments to remain strong for the rest of the year despite continued uncertainty in the Middle East.
He said ongoing foreign direct investment, development financing and other capital inflows will help support the Kenya shilling.
“So, in short, we still expect a fairly strong balance of payments position this year, notwithstanding what is happening in the Middle East,” he said.
“And therefore, we expect the exchange rate to remain relatively stable.”
The governor said CBK expects foreign exchange reserves to remain between 5.5 and six months of import cover, even after meeting the country’s external payment obligations.
That level, he said, provides sufficient protection against unexpected economic shocks.
“I think that is sufficient for us to be able to address any domestic shocks, whether it’s El Niño that may come towards the end of the year, or if the Middle East situation escalates beyond where we are now,” Thugge said.
Why foreign exchange reserves matter
Foreign exchange reserves are assets held by the CBK in foreign currencies, mainly US dollars. They are used to pay for imports, service external debt and support the Kenya shilling during periods of market volatility.
A higher reserve level also boosts investor confidence because it shows that the country can meet its international financial obligations even during periods of global uncertainty.
Import cover measures how many months a country can continue paying for imports using its foreign exchange reserves if no additional foreign currency enters the economy.
With reserves currently standing at around six months of import cover and expected to rise towards seven months after pending inflows, Kenya remains above the international benchmark of at least three months of import cover.
Although the conflict in the Middle East has disrupted remittances and exports, the CBK believes the Kenya shilling will continue to trade within a stable range because the country is attracting sufficient foreign capital to offset those pressures.