Kenya is set to negotiate a new financing arrangement with the International Monetary Fund (IMF) following a mutual agreement to discontinue the ninth review of the current $3.6 billion loan program. This decision marks a shift in Kenya’s economic engagement with the IMF, as the existing Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs are set to expire next month.
An IMF staff mission led by Haimanot Teferra concluded an eight-day visit to Kenya, during which discussions focused on economic and fiscal policies amid ongoing challenges. In a statement, Teferra confirmed that Kenyan authorities and the IMF team reached a consensus to terminate the ninth review of the ongoing program.
The existing lending arrangement, which began in April 2021, has so far seen the disbursement of $3.12 billion. The program was designed to strengthen Kenya’s economic resilience, address fiscal deficits, and mitigate climate-related financial risks. However, the IMF cited recent anti-tax hike protests in June 2024 as a major disruption to the program’s implementation.
During a visit in December 2024, IMF Deputy Managing Director Nigel Clarke acknowledged the program’s role in stabilizing Kenya’s economy but also pointed out persistent fiscal challenges. He emphasized the need to bolster Kenya’s financial framework and manage growing debt vulnerabilities. Clarke also noted that the government must navigate a delicate balance between meeting its social and developmental needs while fulfilling debt repayment obligations.
With the existing facility nearing expiration, Kenya has formally requested a new financing arrangement from the IMF. The IMF team has acknowledged receipt of the request and confirmed that discussions will soon commence on the framework for a new loan program.
The Kenyan government is expected to pursue a financing package that aligns with its economic recovery strategy while addressing concerns raised by both policymakers and the public. The next phase of negotiations will be crucial in determining the terms of the new facility, ensuring that it supports sustainable economic growth while maintaining fiscal discipline.
As Kenya prepares for talks with the IMF, observers will closely monitor the outcome, particularly in light of recent public opposition to stringent fiscal measures associated with past programs.
