Kenya is set to negotiate a new agreement with the International Monetary Fund (IMF) as its current financial programme nears completion, the global lender announced on Monday.
Despite being one of East Africa’s stronger economies, Kenya is struggling with a significant debt burden of around $80 billion, spanning both domestic and external obligations. Debt repayments now consume nearly two-thirds of the country’s annual revenue, surpassing government spending on essential sectors like health and education. However, efforts to increase tax revenues have faced strong public resistance.
Shift in IMF Programme
During an official visit to Kenya, the IMF confirmed that it had received a formal request from the Kenyan government for a new financial arrangement. The institution also revealed that it would not proceed with the planned ninth review of the current $3.6 billion lending programme, which was initially set to conclude in April, with a final $606 million disbursement due in October.
While details of the new IMF agreement remain unclear, the decision to abandon the review suggests significant challenges in meeting the conditions of the existing programme.
Tax Policy and Public Reaction
Economist Churchill Ogutu of the financial consulting firm IC Group noted that the cancellation of the ninth review was expected, as Kenya had struggled to meet the IMF’s tax increase requirements. He suggested that even if the review had continued, Kenya “might not have received the expected funding” due to unmet financial targets.
Following last year’s public protests against tax hikes proposed by President William Ruto, experts believe the government may pursue a more balanced tax policy to avoid further unrest. Finance Minister John Mbadi has reassured citizens that no new “haphazard” tax measures will be introduced.
The upcoming negotiations with the IMF will be crucial in determining Kenya’s financial strategy as it seeks to stabilize its economy while managing public sentiment on taxation and debt management.