The International Monetary Fund (IMF) has sanctioned a combined disbursement of around $606 million to Kenya, following the successful completion of its seventh and eighth reviews under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF). However, Kenya’s borrowing plan for 2024/25 had anticipated a larger disbursement of $874 million.
This financial assistance aims to support Kenya’s ongoing efforts to rebuild its fiscal reserves, stabilize its economy, and enhance resilience against climate-related shocks. Of the total amount, approximately $485.8 million will be disbursed under the EFF/ECF arrangements, with an additional $120.3 million allocated under the Resilience and Sustainability Facility (RSF).
This funding comes at a time when the nation is grappling with significant revenue shortfalls and increasing debt obligations, both of which continue to threaten its fiscal stability. The IMF aims to help Kenya restore market confidence and facilitate a quicker accumulation of foreign exchange reserves following a period of intense financial strain earlier this year.
Challenges in Revenue Collection and Debt Obligations
While progress has been made in stabilizing the Kenyan shilling and improving foreign reserves, fiscal consolidation has been hampered by a considerable tax revenue shortfall in FY2023/24. Public resistance to increased taxation, spurred by protests against the Finance Bill 2024, has complicated the government’s efforts to balance public spending with its substantial debt commitments.
The IMF’s report highlights the necessity for Kenya to enhance governance, transparency, and accountability in order to build public trust and secure the revenue needed to meet these challenges.
IMF’s Recommendations
The IMF emphasized the importance of implementing a strategic fiscal adjustment to address Kenya’s debt vulnerabilities while protecting essential spending in social and developmental sectors. Key reforms suggested include refining Kenya’s tax system to enhance equity, improving public financial management, and executing climate-focused strategies under the RSF arrangement to attract private climate financing.
