Kenya Seeks New IMF Lending Deal Amid Budgetary Shortfalls Says CS Mbadi

The government is exploring the possibility of securing another loan programme with the International Monetary Fund (IMF) just two months before the end of the current program.

Treasury Cabinet Secretary John Mbadi revealed to Reuters on Wednesday, February 5, that while Kenya has other loan options, the IMF remains one of the most plausible ones after the plan to implement the contentious Finance Bill last year was met by nationwide protests.

“Maybe before the current program comes to a close in April, there should be some indicators of whether we are starting a new program and what that new program will entail,” Mbadi said.

Among the options on the table is a Ksh193.8 billion (USD1.5 billion) loan facility from the United Arab Emirates, at an 8.25 per cent interest rate, but Mbadi divulged that the government was still exploring other avenues, which could also include Eurobonds to fund budgets for this fiscal year.

The CS added, “We have the option of taking that… or we go to the market, which is open now, and with our good and positive credit.”

Despite Kenya’s good borrowing relationship with the IMF, the last considerable loan disbursement was a far cry from the mega-release the government expected.

In October 2024, the IMF Executive Board approved the disbursement of KSh 78.3 billion (USD 606.1 million), which captured the second review of the Resilience and Sustainability Fund (RSF).

Part of the reason the disbursement was lower than what Kenya expected, according to the IMF, was because of the withdrawal of the Finance Bill, which disrupted the country’s path to fiscal consolidation due to a revenue shortfall. 

The bigger picture: As it stands, Kenya could use some form of funding, especially after the US decided to freeze foreign aid in a move that could adversely affect numerous third-world economies. 

Kenya’s debt burden has surged to an unprecedented Ksh10.5 trillion after President William Ruto’s administration took on new loans amounting to Ksh303.2 billion in the year ending June 2024. According to a 2024 Treasury report, however, the debt-to-GDP ratio saw a marginal decline to 65.7 per cent from 72 per cent.

The Treasury has previously highlighted budget constraints as a key factor in debt management, noting that borrowing has become a major source of budget funding. 

Despite the challenges, Mbadi still expects the economy to experience growth this year, with his projections pointing to a surge of 5.3% this year from an estimated 4.6% last year.