The Kenyan government has officially abandoned the ninth review of its International Monetary Fund (IMF) program, which was set to conclude on April 1, 2025. According to National Treasury Cabinet Secretary John Mbadi, the remaining timeframe is insufficient to complete the review, leading the government to seek a fresh program with the IMF.
This decision comes amid mounting economic challenges, as the government struggles to balance its budget. Economic analysts warn that with the termination of the IMF program, Kenya will likely have to rely heavily on domestic borrowing in the next financial year to sustain its operations. This raises concerns about increased debt and higher interest rates, which could further strain an already fragile economy.
The announcement follows recent remarks by Central Bank of Kenya (CBK) Governor Kamau Thugge, who urged the Treasury to address the government’s growing appetite for credit. Thugge emphasized that continued fiscal deficits would hinder efforts to achieve lower and more stable interest rates, which are essential for driving economic growth.
“Unless we can contain the fiscal deficits, not just contain but continue with the fiscal consolidation that the Treasury has been talking about, we will not be able to achieve the kind of low, stable interest rates that are required to really empower and drive economic growth,” Thugge stated.
CS Mbadi acknowledged the financial constraints, admitting that external financing options are becoming increasingly limited due to global economic shifts, particularly in the United States and Europe. He cautioned that Kenya must come to terms with the realities of reduced foreign funding, which will likely have a ripple effect on the private sector’s access to credit.
“We must live with the realities… external financing is becoming scarce, it is not an option,” Mbadi remarked. “If we had options for getting that money, we could engage in a debate. But we don’t have that option.”
With the Treasury confirming that balancing the national budget is currently unfeasible, Kenya faces a challenging fiscal future. The government will need to implement stringent economic measures to manage debt, control expenditure, and stimulate domestic economic growth amid dwindling international financial support.
