Treasury Cabinet Secretary John Mbadi has warned that Kenya is entering its toughest fiscal period yet, anticipating further cuts in foreign funding after the US halted aid through USAID. Speaking at the launch of an anti-corruption framework for Kenya’s justice sector, Mbadi revealed that the European Union (EU) may soon follow the US in withdrawing financial support, forcing Kenya to rely more on domestic resources.
The US was among Kenya’s largest donors, particularly in health and humanitarian aid, with funds directed toward HIV/AIDS and malaria programs. The EU has also been a key development partner, making its potential withdrawal a major blow. Mbadi stressed that Kenya must now “look inward” to sustain its economy amid shrinking external financing.
The country is already grappling with a massive debt burden approximately Ksh.10 trillion in domestic and external loans with two-thirds of annual revenue going toward debt servicing. Mbadi acknowledged that Kenya’s borrowing spree, including a costly Ksh.665 billion Chinese loan taken between 2014 and 2019, has left little fiscal flexibility.
IMF Program Ends Amid Financial Strain
Last week, Kenya and the International Monetary Fund (IMF) agreed to end their current lending program prematurely, leaving $800 million undisbursed. While Mbadi denied that Kenya failed to meet IMF conditions, the move underscores the country’s financial challenges.
Focus on Anti-Corruption and Self-Reliance
Mbadi emphasized that strengthening the justice sector is crucial to curbing corruption and safeguarding public funds. However, with foreign aid dwindling, Kenya must now prioritize revenue collection and prudent spending to avoid a deeper economic crisis.
As global donors tighten funding, Kenya’s ability to navigate this fiscal storm will depend on reducing reliance on debt and foreign aid while boosting domestic productivity. The coming months will test the government’s capacity to stabilize the economy without external support.
