Mbadi warns of economic shock from Middle East conflict
National
By
Lewis Nyaundi
| Mar 27, 2026
Kenya’s economy could take a hit from the ongoing conflict initiated by the United States and Israel against Iran, with Treasury Cabinet Secretary John Mbadi warning that the country was not fully prepared for the unfolding global shock.
Appearing before the National Assembly Budget and Appropriations Committee, Mbadi said the war— which began on February 28, now entering day 29 — had caught many countries off guard, forcing governments to rapidly adjust to emerging economic risks.
And now, the Treasury CS has warned that the country is not fully prepared for the unfolding conflict and its potential economic effects and could see a decline in the projected economic growth.
Mbadi said that while the government had initially projected a 5.3 per cent economic growth in the 2026/27 financial year, that could drop to 5.1 per cent in light of the war.
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“I wouldn’t say that we are fully prepared for the war in the Middle East because no one anticipated it, especially from the Kenyan point of view,” Mbadi told MPs yesterday.
However, Mbadi said the government had adopted a whole-of-government approach to manage the potential economic fallout, particularly in the energy sector, with fears that it could cripple fuel distribution in the country.
“There is a whole government approach to this, beginning with the most affected ministry, the Ministry of Energy. The Cabinet Secretary has been out there and I want to assure you that we are managing the situation,” he said.
Mbadi told MPs that Kenya still had sufficient fuel stocks and supply arrangements that could cushion the country against immediate disruptions.
“We still have stock of fuel and we also have an arrangement that has now probably come to us as a blessing. This government-to-government arrangement is a contractual obligation,” he said.
Under the deal, three oil marketing companies are working around the clock to ensure a steady fuel supply in the country. “The companies that we have an arrangement with are working around the clock to make sure that we have a supply of fuel when that time comes,” he said.
However, lawmakers raised concerns over potential fuel shortages and price shocks, with Wundanyi MP Danson Mwashako Mwakuwona pressing the Treasury on the country’s preparedness.
In response, Mbadi ruled out the return of fuel subsidies but said the government would rely on the Petroleum Development Levy (PDL) to stabilise pump prices.
“I have heard some people talk about fuel subsidy, but I will tell you we will not give subsidies. We will stabilise the prices. We have PDL, which will stabilise — we don’t call it subsidy as such,” he said.
He added that if the conflict drags on, the government may be forced to adopt emergency-style interventions similar to those used during the Covid-19 pandemic or droughts.
“In the event this problem prolongs, we will need to be more creative and deal with it as we dealt with Covid-19 or even how we deal with drought because then it becomes an emergency,” he said.
He warned that while the impact may initially be moderate, prolonged instability in the Middle East could have ripple effects on Kenya’s economy, particularly through rising fuel costs and global inflation.