Kenya is poised to receive Ksh181.3 billion in disbursements from the International Monetary Fund (IMF) this financial year, according to Central Bank of Kenya Governor Dr Kamau. This comes as the country grapples with the economic repercussions of recent deadly protests and a rejected Finance Bill.
The Governor revealed during a press briefing on Tuesday that Kenya expects $1.4 billion (about Ksh181.3 billion) from the IMF, along with an additional $600 million (about Ksh77.7 billion) from a recent review.
"We still have roughly $1.4 billion of disbursements from the IMF between now and the end of the financial year," Thugge stated, "We do hope that a board meeting will be set soon so that those disbursements can be made."
Treasury Principal Secretary Chris Kiptoo had earlier highlighted the government’s plan to seek further financing from the IMF and other sources. "We are beginning to start discussions even on a new program probably with the IMF and others," Kiptoo told lawmakers, emphasising the state’s ongoing talks with the World Bank for new development policy financing.
Thugge revealed that the government is seeking upwards of Ksh770 billion in the current financial year, with a large chunk, Ksh430 billion, being borrowed from the domestic market.
The economic strain has intensified after the Finance Bill 2024 was withdrawn following public outcry. President Ruto conceded that the country must borrow more to maintain government operations.
"Kenya has gone back two years and will need to borrow at least Ksh1.2 trillion this year," Ruto remarked, noting that the government needs to secure Ksh169 billion immediately to address budget shortfalls.
The IMF’s conditions for its loans include raising taxes, reducing subsidies, and curbing government waste, aiming to boost revenue while controlling spending. These measures began last year, with Ruto prioritising the IMF programme.
Kenya’s debt challenges prompted the IMF to approve $941 million for the country in January, bringing the total loaned to $3.9 billion. However, interest payments on Kenya’s debt consume almost 38% of annual revenues, according to the World Bank. Despite these pressures, Kenya has expressed confidence in its ability to bridge financing gaps through global bond markets.
During the seventh review, IMF funding to Kenya under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangement was reduced by $288 million to $3.60 billion. This reduction followed Kenya’s successful partial repayment of a $2 billion Eurobond in February 2024.
Treasury Principal Secretary Chris Kiptoo explained, "We had asked for exceptional access, and they [the IMF] gave us. Since the country can now access the international market easily, there is no need to maintain the augmented IMF allocation initially meant to help settle the $2 billion Eurobond."
Kenya’s fiscal situation remains precarious. The withdrawal of the Finance Bill 2024, which was intended to generate Ksh346 billion ($2.68 billion) or 3 per cent of GDP in additional revenue, has left a significant gap. To address this, Ruto signed the Supplementary Appropriations Bill into law, introducing Ksh145.7 billion in budget cuts.
IMF’s involvement has been critical in maintaining Kenya’s economic stability. The loan conditions, although stringent, are seen as necessary to restore fiscal discipline. Governor Thugge and PS Kiptoo continue to engage with development partners to secure additional external financing.
"What we are doing is trying to talk to our development partners both bilateral as well as multilateral to get additional external financing," Thugge stated.
The Kenyan government’s strategy includes tapping into global bond markets, a move that reflects its confidence in managing debt sustainably. This approach has been partly validated by the successful Eurobond issue earlier this year.
