Kenya's government has applied for a new lending programme with the International Monetary Fund (IMF) after forgoing the final review of the existing arrangement.
According to Finance Minister John Mbadi, the decision to skip the ninth and final review of the current programme, which left approximately $800 million (Sh104.4 billion) undistributed, does not impact other funding sources.
He stated that the World Bank’s loan was subject to separate conditions, including the passage of a conflict of interest bill that the government is finalising.
However, ratings agency S&P has warned that the missed IMF disbursements could complicate the government's strategy to reduce debt-servicing costs and might hinder access to additional funding..
"Since IMF funding often serves as a catalyst for other official and private flows, we expect there might be delays to World Bank (about $800 million) and United Arab Emirates (UAE; $1.5 billion) funding in first-half 2025," S&P said in a statement.
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Despite this, S&P noted that the government has built up substantial foreign exchange reserves, estimated at about $10 billion, which could cushion the immediate impact.
"In the meantime, the government has built up sufficient foreign exchange reserves of about $10 billion and could plug immediate concessional financing shortfalls with domestic funding or other commercial facilities, albeit at a much higher cost," the agency added.
The decision to forego the final IMF review underscores the complexities of Kenya’s economic management strategy as authorities balance immediate fiscal needs against long-term financial sustainability.
With multiple funding streams now under scrutiny, the government faces the challenge of securing the necessary resources without escalating borrowing costs.
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