(NAIROBI, KENYA) – Kenyan lawmakers have increased pressure on the National Treasury to revive a foreign exchange compensation scheme for diplomatic missions abroad, aiming to protect their budgets from the impact of a volatile shilling.
The Public Accounts Committee (PAC) of the National Assembly asked the Treasury to compensate the State Department for Foreign Affairs for foreign exchange losses it has incurred over the years. The request is in line with Section 47 of the Foreign Service Act, 2021.
This comes amid similar calls by other parliamentary groups, including the Defence, Intelligence and Foreign Relations Committee.
The State Department for Foreign Affairs says it is in talks with the Treasury to reinstate the Foreign Exchange Loss Assumption Facility. Under this facility, diplomatic missions abroad would be reimbursed for losses arising when the shilling weakens against the currencies of the countries where they are based.
The facility was reduced to zero in the financial year ending June 2013.
Section 47 of the Act deals specifically with foreign exchange fluctuations.
“The National Treasury shall compensate the Ministry for any loss incurred resulting from foreign exchange adjustment, from monies sent to its Missions abroad,” reads part of the Act.
Kenya’s diplomatic missions abroad receive their budgets in Kenyan shillings, while much of their expenditure is incurred in local and other foreign currencies.
As at June 2023, Kenya’s diplomatic missions had accumulated KES 2.5 billion ($17.2 million / £13.5 million) in foreign exchange losses. The PAC directed the Treasury to compensate the State Department. The PAC report was adopted by the National Assembly in March 2026.
In response, the State Department for Foreign Affairs said it had requested the National Treasury to reimburse it for the losses.
The money was expected to be provided as additional funding in the second Supplementary Budget for the financial year ending June 2026 and/or in the current budget cycle.
“Further, as a way forward in managing forex losses into the future, the State Department is in consultation with the National Treasury to reinstate into the State Department’s budget the Foreign Exchange Loss Assumption Facility that was cut to zero in the financial year 2012/13 to cushion the State Department/Missions from the volatile/unpredictable forex market,” said the State Department for Foreign Affairs.
“The National Treasury’s action on this matter is still awaited.”
Kenya has 70 fully fledged diplomatic missions abroad, including embassies and high commissions, which receive budgets in shillings but incur much of their expenditure in foreign currencies.
In addition to paying salaries to workers in these missions, the State Department incurs administrative costs such as office and residential rent, utilities, vehicle maintenance, travel, security and other operational expenses.