Kenya: energy shock adds to currency, sovereign risks

Kenya’s reliance on energy imports from Gulf States leaves it amongst the most vulnerable on the continent to the conflict in the Middle East. The fragile external position leaves the onus on the government to either tighten fiscal policy or allow the shilling to weaken in order to weather the shock. But with elections approaching, officials may try to muddle through, but that could store up a more painful larger currency fall and/or a return to sovereign debt distress further down the line.