The International Monetary Fund (IMF) has approved a Sh78 billion (US$605 million) disbursement to support Kenya in strengthening its fiscal and external stability and increasing resilience to climate-related shocks.
This decision follows the seventh and eighth reviews under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF), along with a review under the new Resilience and Sustainability Facility (RSF).
The EFF and ECF programs, launched in April 2021, aim to address Kenya’s debt challenges while ensuring resources for essential social and developmental needs. The RSF, established in July 2023, specifically focuses on climate resilience and encouraging private climate investment.
This funding comes after addressing exceptional financing needs earlier this year, enabling shifts in access limits under the EFF/ECF programs and reducing Kenya’s interest payments to the IMF.
Despite recent improvements like currency stabilization and reserve accumulation, Kenya still faces fiscal challenges, including a tax revenue shortfall in the 2023/24 fiscal year and the recent withdrawal of the 2024 Finance Bill following public protests.
The IMF acknowledged the progress of the EFF/ECF program in reducing inflation and stabilizing the exchange rate. However, IMF First Deputy Managing Director Gita Gopinath emphasized the need for a credible fiscal consolidation strategy to address debt challenges while safeguarding social spending.
She stated that reforms to make Kenya’s tax system more efficient, equitable, and progressive, as well as enhancing public finance accountability, are critical to gaining public support for these reforms.
President William Ruto’s administration has faced obstacles in advancing its agenda, particularly after protests led to the withdrawal of the 2024 finance bill.
