By Benadeta Mwaura - Reporter
Kenya, 5 november 2025 - Kenya and the International Monetary Fund (IMF) have opened fresh negotiations for a new multi-year support program, just months after the expiry of the $3.6 billion facility signed in 2021. The proposed framework aims to stabilise debt, support infrastructure projects, and anchor fiscal reforms, but a technical debate over what counts as sovereign debt threatens to slow progress.
According to Finance Minister John Mbadi, the sticking point involves the IMF’s classification of securitised loans, particularly those backed by future tax or levy revenues. “Kenya is seeking clarity, these are structured financial tools, not traditional sovereign loans,” Mbadi told reporters on Monday. “We expect a mutual understanding because both sides share the goal of maintaining debt sustainability.”
What’s Happening
The previous IMF Extended Credit Facility (ECF) and Extended Fund Facility (EFF) expired in April 2025. It provided policy anchors for Kenya’s post-pandemic recovery and budget support, including the controversial fiscal consolidation that saw subsidy cuts and new taxes.
This time, Treasury insiders say Nairobi is pushing for a more flexible deal, one that allows borrowing for infrastructure while preserving fiscal discipline.
The IMF has confirmed receiving Kenya’s formal request for a follow-up program. “We have initiated discussions with the authorities on a successor arrangement,” an IMF spokesperson said in a statement to Reuters.
Why It Matters
Kenya’s external public debt has surged past KSh 11.2 trillion, and debt service now consumes nearly 65 percent of annual revenues. The IMF’s endorsement is crucial for unlocking concessional funding from other lenders and keeping Eurobond yields in check.
More from Kenya
However, the securitisation debate matters because it could reshape how Kenya finances large projects. Instruments such as the KSh 175 billion road-levy-backed bond and future infrastructure securitisations could either be counted as public debt or treated as quasi-commercial arrangements, a distinction that affects Kenya’s borrowing ceiling. Economist Dr. Jared Osoro notes that this gray area could impact future fiscal space.
“If securitised instruments are booked as sovereign debt, Kenya’s room to borrow shrinks; if not, it raises transparency questions,”. “Either way, IMF approval will determine how comfortably Nairobi can keep building.”
The Bigger Picture
The negotiations come as Kenya juggles domestic austerity and public anger over rising living costs. IMF-backed reforms, including higher VAT and energy levies, have been politically painful, but officials argue they’re stabilising the shilling and rebuilding reserves.
President William Ruto’s administration is also trying to reassure investors after a string of debt downgrades. With the $2 billion Eurobond repayment due in 2026, Kenya hopes the new IMF program will anchor confidence in its fiscal outlook.
What’s Next
Treasury officials say a technical team from Washington will visit Nairobi later this month to finalise terms. If successful, the deal could unlock an additional $700 million in budgetary support before year-end. “We’re not negotiating from weakness,” Mbadi said. “We’re negotiating for sustainable growth.”
