Kenya to Reopen Talks with IMF for New Financing Programme

Nairobi, Kenya — 2025-09-11 11:42 EAT. Prime Cabinet Secretary Musalia Mudavadi announced that the National Treasury will soon begin formal engagements with the International Monetary Fund (IMF) to negotiate a new financing program. The move follows the expiry of Kenya’s previous $3.6 billion IMF arrangement and the withholding of its final disbursement after unmet fiscal targets. 

1) The Latest

• What happened now: During the quarterly diplomatic briefing, Mudavadi confirmed Kenya is preparing to engage with the IMF to secure funding aimed at stabilising the economy and backing priority development goals. 

• Why it matters: Without fresh funding, Kenya risks continued fiscal strain, high debt servicing costs, and weak capacity to deliver essential services. A successful programme could boost investor confidence.

• Status: Developing — formal talks are expected to begin over the coming weeks. 

2) Context in Brief

• Kenya’s previous IMF agreement was signed in April 2021, for about US$3.6 billion under the Extended Fund Facility (EFF) / Extended Credit Facility (ECF) framework. It officially expired in April 2025. 

• The last (ninth) review under that agreement was not completed, meaning Kenya forfeited the final disbursement of approximately $800 million that would have come if targets (budget deficit, revenue collection) had been met. 

• In parallel, Kenya is exploring other funding mechanisms including diaspora bonds, privatisation of some state assets, and bond refinancing to meet obligations and close immediate financing gaps. 

• There is also an ongoing effort to remove Kenya from the FATF grey list by improving compliance on anti-money laundering and counter-terrorism financing. 

3) Law, Policy, and Process

• Constitution/Acts: The government’s borrowing, debt management, and fiscal deficit targets are governed under the Public Finance Management Act, and oversight by the National Treasury. Agreements with IMF must align with law and approved budgets.

• Mandates:

  • The National Treasury leads negotiations, sets fiscal targets.

  • Central Bank of Kenya oversees monetary policy and inflation.

  • Parliament must approve certain aspects including external borrowing and conditions in loan agreements.

• What should happen next per law:

  • Submission of formal request or negotiation documents to the IMF.

  • Agreement on key conditionalities (e.g., fiscal consolidation, revenue reforms).

  • Parliamentary debate or approval of resultant agreement.

  • Ensuring transparency & accountability in use of funds.

4) Voices and Stakeholders

• Musalia Mudavadi, Prime Cabinet Secretary: Confirmed Treasury is preparing for IMF engagement to stabilise economy and sustain development priorities. 

• Analysts / Economic Experts: Caution that Kenya may need to address inherit unresolved obligations under the previous IMF program and demonstrate credible reforms before a new program is approved. 

• Development partners / investors: Likely watching closely for Kenya’s fiscal discipline, revenue mobilisation, and compliance with IMF conditionality.

5) Evidence & Data Box

6) Risks and Implications

• Financial risk: Continued delays in securing a new programme may worsen debt servicing pressure and risk rating downgrades.

• Reform fatigue / public resistance: Measures required by IMF (e.g. revenue increases, austerity) may face backlash.

• Conditionality constraints: IMF may demand strict conditions that could impact public spending or social programs.

• Delays: Without speed, Kenya may lose favorable lending windows or further escalate borrowing costs.

7) What We Don’t Know Yet

• The exact conditionalities IMF will demand for the new programme.

• Whether the programme will be “funded” (i.e. IMF provides financing) or “non-funded / precautionary” (only a standby arrangement). 

• Duration of the negotiations and the expected timeline for implementation.

• How this will impact domestic debt restructuring or repayment obligations.

• What sectors will be prioritized under the programme.

8) Timeline

• April 2021: Kenya begins the $3.6 billion IMF Extended Fund Facility / Extended Credit Facility agreement. 

• July 2023: Programme extended with Resilience & Sustainability Facility (RSF) component. 

• April 2025: Programme expires; ninth review not concluded; final disbursement (~US$800m) forfeited. 

• September 2025: Mudavadi announces Kenya will engage IMF on new programme during Quarterly Diplomatic Briefing. 

9) What to Watch

• The composition and mandate of Kenya’s negotiating team with the IMF.

• Whether IMF approves a new programme before 2027 or later.

• How the government balances conditionality with social sector spending.

• Market reactions: investor confidence, interest rates, and foreign exchange stability.