In its October 2026 Regional Economic Outlook, the International Monetary Fund cautioned African governments, including Kenya, against using broad fuel subsidies to shield citizens from commodity price shocks, noting the high fiscal cost of such measures.

The Fund estimated that generalized fuel price smoothing can cost roughly 4 % of GDP, a burden it described as fiscally unsustainable over time.

Instead, the IMF recommended that Kenya provide narrowly targeted support to low‑income households, using tools such as school‑feeding programmes, geographically focused transfers, or assistance to vulnerable farmers, while improving social registries and payment infrastructure.

The report advised that any windfall revenues from oil, gold, copper or other commodity exports should primarily be directed toward clearing arrears or retiring expensive debt, rather than financing new permanent spending.

On borrowing, the IMF stressed that any new debt must remain consistent with Kenya’s debt‑sustainability framework, and that grants or concessional loans should complement, not replace, domestic revenue reforms and protect priority spending.

The Fund also highlighted that existing automatic stabilisers and scalable social protection systems should be the first line of defence against shocks, with any gaps filled by the narrowest feasible proxies.

Finally, the IMF warned that losses must not be allowed to accumulate off‑budget within state‑owned importers, utilities or transport companies.