Kenya plans $500 million debut green bond as Iran war shakes economy

Kenya has revealed plans to raise its first $500 million green sovereign bond before the end of the fiscal year in June, with support from the World Bank, to close a funding gap and strengthen financing options. The Central Bank of Kenya said the issuance is part of a pipeline of external borrowing planned within the fiscal calendar. Officials said the bond will tap climate financing and ease pressure on public finances as global conditions become less predictable.

The timing comes as higher global oil prices, driven by tensions involving Iran, ripple through energy markets and raise costs for fuel-importing countries. Kenya, which relies heavily on imported petroleum, has been directly exposed to those price shifts. Central Bank Governor Kamau Thugge said the country has also sought faster financial support from the World Bank to help manage the impact on fuel supplies and inflation, though he did not disclose the size.

Energy disruptions strain budgets, currencies, trade flows

The developments place Kenya among emerging economies seeking assistance from multilateral lenders as energy market disruptions add to fiscal strain. International Monetary Fund Managing Director Kristalina Georgieva said at least a dozen countries have approached international institutions for support in managing the effects of the conflict on budgets, currencies and trade flows. She said during a briefing that requests reflect pressure on public finances and exchange rates in affected economies according to the IMF statement.

Investor reaction to Kenya’s financing signals has so far been measured but steady. Eurobond prices rose modestly, with the 2034 and 2048 issues each gaining about one cent. The bonds traded at 89.21 cents and 99.25 cents on the dollar, suggesting cautious confidence that external support could help ease near-term funding pressure.

Kenya’s reserves above $13 billion, 5.8-month cover

Kenya’s external position is supported by foreign exchange reserves above $13 billion, equal to about 5.8 months of import cover. Policymakers say the buffer gives the central bank room to respond to short-term shocks. Even as they acknowledge that prolonged high oil prices could weigh on the shilling and raise import costs, they said in a recent statement.

The government has moved to cushion households from higher fuel prices. President William Ruto signed a law cutting value-added tax on petroleum products to eight percent from 13 percent for three months. The measure is aimed at lowering transport and food distribution costs, according to a presidency statement, as part of efforts to ease domestic cost pressures.

The CBK has also revised its growth outlook, trimming Kenya’s 2026 projection to 5.3 percent from 5.5 percent, citing uncertainty linked to global tensions and their spillover effects on trade and consumption. At its most recent meeting, the bank held its benchmark interest rate steady, signaling a wait-and-see approach as it monitors inflation trends and external risks. Officials have also indicated that longer-term reserve diversification remains under review.