An IMF staff mission to Kenya concluded this week without a new lending agreement, with Finance Minister John Mbadi telling reporters the talks were "very far" from producing a deal, as the Fund said discussions would continue at the IMF-World Bank Spring Meetings.
- The IMF mission ran from February 24 to March 4, aimed at advancing technical discussions following Kenya’s formal request for a successor programme after its previous $3.6 billion arrangement expired in April 2025.
- Mbadi was unambiguous: "IMF was not coming for any deal. They are coming for engagement." The visit will not result in an IMF Executive Board discussion, the Fund confirmed.
- The central sticking point remains debt classification. The IMF wants Kenya’s securitised revenue bonds, used to fund infrastructure projects including road construction and airport expansion, treated as sovereign debt. Nairobi objects, arguing they are distinct from direct government borrowing.
- The IMF’s closing statement called for stronger fiscal discipline, enhanced fiscal credibility, and greater resilience to external shocks. Risks from Middle East conflict spillovers were also discussed.
- Kenya has not factored IMF funding into its current budget or the next fiscal year beginning July 2026. The government raised $2.25 billion through new Eurobonds last month, reducing short-term pressure to close a deal.
- Kenya’s external debt stood at $40.5 billion at end of March 2025, with the World Bank the largest creditor at $14.4 billion, followed by Eurobond holders at $7.52 billion and China at just over $5 billion.
The securitisation dispute is not merely technical. Kenya has been issuing revenue-backed bonds to fund major capital projects including JKIA expansion and the Nairobi-Mombasa railway, treating the proceeds as off-balance-sheet. The IMF’s insistence on including these in the debt stock would likely push Kenya’s debt ratios above the thresholds that underpin any new programme, forcing a more restrictive fiscal path. Nairobi is reluctant to accept that framing, particularly ahead of another election cycle. The Eurobond issuance buys time but does not resolve the structural tension: Kenya needs investor confidence that IMF support implies, but is resisting the conditionality that would come with it.
The Bigger Picture: Kenya’s IMF impasse is a fiscal credibility problem wearing the clothes of a technical accounting dispute. The securitisation question matters because it determines how large Kenya’s real debt burden is and what adjustment would be required under a programme. Nairobi’s refusal to accept the IMF’s classification suggests the government knows the numbers look worse under that framework. Without a programme, Kenya remains dependent on Eurobond markets at elevated spreads and bilateral lenders. The Spring Meetings in April are the next hard deadline. If talks stall again there, the market will draw its own conclusions.
Source: CNBC Africa / MarketScreener
