Kenya will defer Sh88.1 billion in IMF funding to next year while discussing a new financing program following April’s current arrangement. The anticipated IMF support has decreased significantly, leading to broader fiscal budget revisions that indicate rising expenditures and an increased fiscal deficit. The discussions with the IMF are ongoing, focused on sustaining necessary reforms and revenue mobilization efforts.
Kenya will postpone the disbursement of Sh88.1 billion from the International Monetary Fund (IMF) to the next fiscal year as talks begin for a new financing program after April. The government’s plans include rolling over funds from its current IMF-backed arrangement, indicating preparations for a successor program once the existing agreement concludes.
The Budget Policy Statement 2025, presented to Parliament, reveals that expected IMF support for 2024-25 has been significantly reduced from Sh138.3 billion to Sh50.2 billion, marking a decline of 63.7 percent. This means any new program may initially include the deferred Sh88.1 billion from the previous funding cycle.
Albert Mwenda, Treasury’s director-general for Budget, Fiscal, and Economic Affairs, stated, “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.” He emphasized starting negotiations now to facilitate a seamless transition to the new agreement.
In light of these developments, the Treasury plans to revise the spending proposal for 2024-25, with total expenditures anticipated to rise by Sh199 billion as outlined in the upcoming Supplementary Budget II. Despite expenditures increasing, revenue projections will remain at Sh3.06 trillion.
The Cabinet has approved an additional Sh199.9 billion to support various government initiatives, including externally funded projects and revenue adjustments. Consequently, the fiscal deficit for the ongoing financial year has widened to Sh862.7 billion, up from Sh768.7 billion under the previous budget revision.
Treasury discussions with the IMF regarding the forthcoming program are still in preliminary phases. Mwenda noted that various considerations will be taken into account, including the potential for a funded program with a loan component being an option in negotiations.
So far, Kenya has received Sh415.1 billion in aid under the current IMF arrangement, with the latest significant payment occurring in November 2023. The recent disbursement faced delays linked to the withdrawal of the Finance Bill 2024, ultimately releasing Sh78.3 billion after the combined seventh and eighth reviews.
To address challenges in domestic revenue mobilization, the Budget Policy Statement 2025 outlines several measures, including raising the domestic borrowing target from Sh413.1 billion to Sh593.7 billion, a 43.7 percent increase. The government also revised its commercial loan target upwards under the Supplementary Budget II, from Sh168.8 billion to Sh195.0 billion, reflecting a 15.5 percent increase.
Kenya’s decision to defer Sh88.1 billion in IMF funding highlights its efforts to transition smoothly to a new financing program. Significant revisions to both its anticipated IMF support and national budget underscore growing fiscal pressures. Ongoing discussions aim to secure new funding while addressing domestic revenue challenges, illustrating a complex balancing act in the wake of changing economic dynamics.
Original Source: eastleighvoice.co.ke
