IMF Set to Rule on Kenya’s Sh77.9B Funding Request by October 30

The International Monetary Fund (IMF) is set to review Kenya’s performance under their current loan program on October 30.

Kenya awaits the IMF decision on a $600 million disbursement, part of a larger $3.9 billion loan program agreed upon in 2021. This seventh review comes at a time when Kenya faces economic challenges, including recent nationwide protests over controversial tax measures that resulted in casualties and policy reversals. Despite these setbacks, Treasury Cabinet Secretary John Mbadi has expressed optimism about the review’s outcome. Mbadi asserts that all concerns raised by the IMF have been addressed, and he plans to travel to Washington for discussions with IMF and World Bank representatives.

While acknowledging the importance of securing these funds, Mbadi maintains that Kenya will continue to manage its financial situation even if the loan is delayed. The IMF loan program is crucial for Kenya, which is currently classified as being at high risk of debt distress. The country anticipates an additional $1 billion by mid-2025 as part of broader efforts to mitigate this risk. However, delays in loan approval have already strained the Treasury’s budget, widening the projected budget deficit from 3.3% to 4.3% of GDP. In response, the government has increased its borrowing plans, aiming to raise substantial sums from both local and foreign sources.

Central Bank Governor Kamau Thugge has indicated that Kenya has met most of the IMF’s review targets, with revenue collection being the primary area of concern. The review will also encompass a separate climate-financing program linked to Kenya’s resilience and sustainability efforts. Thugge notes that the IMF’s seventh and eighth reviews would be combined to expedite the disbursement process.

The IMF’s assessment will take into account the economic impact of the June protests and the subsequent decision to abandon proposed tax hikes. An IMF delegation visited Kenya in September to evaluate these developments, and the fund has signalled that adjustments to the program may be necessary given the evolving circumstances.