The country is once again turning to the International Monetary Fund (IMF) for financial support as it navigates mounting economic challenges, including rising public debt and the fallout from a previously paused bailout program. Central Bank Governor Kamau Thugge has confirmed that the country intends to secure a funded IMF program, signaling a fresh request ahead of the IMF’s visit next month.
The move comes after Kenya abandoned its previous $3.6 billion Extended Fund Facility (EFF) and Extended Credit Facility (ECF) earlier this year, largely due to missed fiscal targets and public unrest over proposed tax increases. The failure to meet key benchmarks—especially in deficit reduction and revenue mobilization—resulted in the loss of a final $800 million disbursement. Public backlash against the tax plan forced the government to withdraw it, leaving a funding gap that has since widened.
Urgency and Economic Context
Governor Thugge emphasized that a funded arrangement, as opposed to an unfunded technical agreement, is critical for Kenya at this point. The country is grappling with heavy external debt repayments, high inflation, and budgetary pressures that cannot be addressed solely through policy guidance. Access to actual IMF funds would provide much-needed liquidity to stabilize the economy and restore investor confidence.
Kenya’s economic challenges are deepening. Inflation remains elevated, interest rates are high, and government revenues have fallen short of projections. While the Central Bank has cut interest rates in recent months to stimulate growth, recovery has been slow. Businesses are facing reduced consumer demand, and households are struggling with rising costs.
The IMF program, if approved, could bring more than just financial relief. It would signal to global markets that Kenya is serious about fiscal discipline, potentially strengthening the shilling and improving access to other forms of financing. However, the government will need to tread carefully. Last year’s tax protests highlighted the political risks of unpopular reforms, and public trust remains fragile.
The IMF visit next month will be crucial in determining whether Kenya can secure this support. Success will depend on the government’s ability to present credible fiscal reforms that satisfy IMF conditions without igniting fresh political unrest. For ordinary Kenyans, the outcome could affect the cost of living, availability of credit, and the overall pace of economic recovery.
