IMF Set To Disburse Ksh181.3B To Kenya Amid Economic Disruption
Kenya is expected to receive Ksh181.3 billion in disbursements from the International Monetary Fund (IMF) this fiscal year, according to Central Bank of Kenya Governor Dr Kamau.
This comes as the country deals with the economic fallout from recent deadly protests and a rejected Finance Bill.
During a press briefing on Tuesday, the Governor stated that Kenya expects $1.4 billion (about Ksh181.3 billion) from the IMF, plus 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 previously announced the government’s intention to seek additional financing from the IMF and other sources.
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“We are beginning to start discussions even on a new program probably with the IMF and others,” Kiptoo told lawmakers.
Kiptoo emphasised that the state is in ongoing discussions with the World Bank for new development policy financing.
Thugge revealed that the government plans to borrow up to Ksh770 billion in the current fiscal year, with Ksh430 billion coming from the domestic market.
The economic strain has increased since the Finance Bill 2024 was withdrawn due to public outcry. President Ruto admitted that the country will need to borrow more money to keep government operations running.
“Kenya has gone back two years and will need to borrow at least Ksh1.2 trillion this year,” Ruto remarked
Ruto claimed that the government must secure Ksh169 billion immediately to address budget deficits.
The IMF’s loan conditions include raising taxes, reducing subsidies, and reducing government waste, with the goal of increasing revenue while controlling spending.
These measures were implemented 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, the World Bank reports that interest payments on Kenya’s debt account for nearly 38% of annual revenues.
Despite these challenges, Kenya has expressed confidence in its ability to close financing gaps via global bond markets.
During the seventh review, IMF funding for Kenya under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangement was reduced by $288 million to $3.60 billion.
This reduction follows Kenya’s successful partial repayment of a $2 billion Eurobond in February 2024.
“We had asked for exceptional access, and they [the IMF] gave us,” Treasury Principal Secretary Chris Kiptoo explained.
“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 financial situation remains precarious. The withdrawal of the Finance Bill 2024, which was expected to generate Ksh346 billion ($2.68 billion), or 3% of GDP in additional revenue, has left a significant gap.
To address this, Ruto signed the Supplementary Appropriations Bill into law, which introduced Ksh145.7 billion budget cuts.
The IMF’s involvement has been critical in keeping Kenya’s economy stable. The loan conditions, while stringent, are viewed as necessary for restoring fiscal discipline.
Governor Thugge and PS Kiptoo continue to work with development partners to secure additional external funding.
“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, demonstrating its confidence in sustainable debt management.
This approach was partially validated by the successful Eurobond issue earlier this year.
IMF Set To Disburse Ksh181.3B To Kenya Amid Economic Disruption
