Kenya to defer Sh88.1 billion IMF funding to next year
A rollover involves renewing a loan instead of repaying it at maturity, with the outstanding principal and other components carried forward, with or without interest.
Kenya is set to defer Sh88.1 billion in International Monetary Fund (IMF) funding to the next financial year as the Treasury initiates talks for a fresh financing programme beyond April.
According to the Budget Policy Statement 2025 tabled in Parliament, the move will see the government roll over the funds from the ongoing IMF-backed financing arrangement, signalling plans for a successor programme once the current one expires.
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A rollover involves renewing a loan instead of repaying it at maturity, with the outstanding principal and other components carried forward, with or without interest.
Treasury data, in the statement, indicates that the anticipated IMF disbursement for the 2024-25 financial year under the Extended Credit and Extended Fund Facility has been revised downwards from Sh138.3 billion to Sh50.2 billion, representing a 63.7 per cent reduction. Consequently, if a new IMF programme is agreed upon, it would begin with the Sh88.1 billion deferred from the last instalment of the existing arrangement.
“We are discussing with the Fund the possibility of a new programme that can sustain the reforms we have been undertaking under the current programme. If we agree with the Fund, we may roll over the balance of the funding to the new programme,” Treasury’s director-general for Budget, Fiscal and Economic Affairs, Albert Mwenda, stated.
“The reason we are starting negotiations for a new programme early and even before the conclusion of the current one is to ensure a smooth transition,” he added.
Increased expenditure
The development comes as the Treasury revises the 2024-25 spending plan. A Cabinet dispatch on February 11 revealed that total expenditure is expected to increase by Sh199 billion under Supplementary Budget II, which is set to be tabled in the National Assembly next week. However, the total revenue projection remains at Sh3.06 trillion.
“Cabinet also approved the proposed 2024-25 Supplementary Estimates No.2 authorising an additional Sh199.9 billion. These funds will address government and externally funded projects, personnel emoluments, budget realignment, and revenue adjustments,” the Cabinet statement read.
As a result of the expenditure and revenue revisions, the fiscal deficit for the current financial year has widened from Sh768.7 billion under Supplementary Budget I to Sh862.7 billion under Supplementary Budget II.
The Treasury has indicated that a funded programme—including a loan component—remains one of the options under consideration in discussions with the IMF for a new arrangement.
“Discussions with the Fund are at early stages and there will be many considerations, and a funded programme is also an option on the table,” Mwenda said.
Kenya has so far received eight disbursements totalling Sh415.1 billion under the current IMF programme, with the largest—Sh80.7 billion—received in November 2023 after the sixth review. However, the latest disbursement faced delays following the withdrawal of the Finance Bill 2024, resulting in the release of Sh78.3 billion after the combined seventh and eighth review in November 2024.
The Budget Policy Statement 2025 also outlines measures the government intends to implement to address domestic revenue mobilisation challenges.
The domestic borrowing target has been raised from Sh413.1 billion under Supplementary Budget I to Sh593.7 billion, a 43.7 per cent increase. Additionally, the government has revised its commercial loan target in global markets from Sh168.8 billion to Sh195.0 billion under Supplementary Budget II, reflecting a 15.5 per cent increase.
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