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Kenya to forego Sh63bn in IMF funding
National Treasury and Economic Planning Cabinet Secretary John Mbadi addressing journalists outside the National Treasury Building in Nairobi on February 13, 2025.
Kenya is set to miss out on Sh63.4 billion ($490 million) in new funding from the International Monetary Fund (IMF) on the termination of a multi-year programme that was set to close in April even as the country eyes a fresh arrangement with the fund.
The fund says it has reached an agreement with Kenya calling off the ninth review of the extended credit facility and the extended fund facility (ECF/EFF), which were reached in April 2021, bringing the programme to an abrupt stop before the disbursement of all available funding.
Kenya has so far accessed Sh404 billion ($3.12 billion) for the ECF/EFF programmes out of a possible Sh467.5 billion ($3.61 billion) leaving an undisbursed balance of about Sh63.4 billion ($490 million).
“The Kenyan authorities and IMF staff have reached an understanding that the ninth review under the current Extended Fund Facility and Extended Credit Facility programmes will not proceed,” the IMF said in a statement on Monday.
“The IMF has received a formal request for a new programme from the Kenyan authorities and will engage them going forward.”
The IMF did not provide reasons for the termination in the statement, but Kenyan authorities have previously indicated plans to push funding from the final disbursement from the programme into a new arrangement.
The Treasury in the 2025 Budget Policy Statement, for instance, revised the expected disbursements from the IMF under the ECF/EFF programmes to Sh50.2 billion from Sh138.2 billion to account for the possible lapse of the programme without additional funding.
The Exchequer indicated previously that the balance from the two facilities would be rolled over into the new fund currently under consideration.
“We are discussing with the Fund the possibility of a new programme that can sustain reforms we have been undertaking under the current programme. If we agree with the Fund, we may roll over the balance of the funding to the new programme,” Treasury director general for Budget, Fiscal and Economic Affairs Albert Mwenda earlier told the Business Daily.
Kenya, however, still has access to funding under the Resilience and Sustainability Fund, a climate linked programme detached from the terminated facilities, which has so far disbursed Sh23.3 billion ($180.4 million) out of a possible Sh70.1 billion ($541.3 million).
Kenya has been eyeing a new programme with the IMF for the better part of the past year with the ECF/EFF programmes having been on schedule to lapse in April 2025.
The nature of the next programme has, however, been unclear given that Kenya has exhausted its quota of IMF resources under the current arrangements implying the possibility of an un-funded programme in the future.
Kenya has equally failed to meet targets under the programme, including revenues, increasing its debt vulnerabilities while risking the support of the IMF.
“Performance since the last reviews of these arrangements has weakened. While accumulation of foreign exchange reserves and inflation were better than expected, the fiscal performance fell significantly short of the targets,” the IMF said in a report accompanying the seventh and eighth reviews of the ECF/EFF arrangements last November.
“The revenue and export underperformances increased debt vulnerabilities. Implementation of several reforms was also delayed.”
The changes to expected disbursements from the IMF programme has seen the National Treasury cut its net foreign financing target for the fiscal year ending in June 2025 to Sh280.1 billion from Sh355.5 billion.
The shortfall in external funding is expected to be offset through more local debt, with higher domestic borrowing being raised to Sh582.7 billion from Sh413.1 billion previously. The expected fiscal deficit at the end of the financial year has shot up to 4.9 percent of GDP from an initial 4.3 percent.
