Oil shocks: Kenya’s narrow policy window

Kenya, as a net oil importer, feels the immediate effects of rising global oil prices, leading to imported inflation and pressure on foreign exchange reserves. Transport costs rise, impacting food and electricity prices. Monetary policy is constrained, as rising inflation calls for tightening, but this may worsen the economic situation by slowing domestic demand. Households and firms face higher costs, which could deepen the economic downturn.