Kenya’s access to critical international financing has stalled after both the International Monetary Fund (IMF) and the World Bank delayed or froze disbursements of much-needed loans, citing the government’s failure to meet key conditions tied to reform programmes.
The development marks a significant setback for the country’s fiscal strategy amid rising debt and budgetary pressures.
The IMF terminated a multi-year funding arrangement initiated in 2021 after Kenya failed to satisfy most of the performance benchmarks agreed under its Extended Fund Facility (EFF) and Extended Credit Facility (ECF).
As a result, the country lost access to roughly $850 million (around KSh 109.7 billion) that had been expected under the programme.
Kenya reportedly missed targets including tax revenue thresholds, budget deficit limits, restructuring of Kenya Airways, and settlement of government arrears.
Treasury officials had hoped for a final IMF review to unlock further funds, but the review was abandoned in early 2025 after Kenya could not meet the conditions.
IMF staff later confirmed that Kenya has formally requested a new lending programme, and discussions are expected to continue into early 2026.
The World Bank has also frozen disbursements under its Development Policy Operations (DPO) facility, withholding a $750 million (approximately KSh 96–97 billion) tranche that was initially expected earlier in the fiscal year.
The Bretton Woods institution has linked the release of funds to a wide set of conditions covering legislative and policy reforms, including, but not limited to:
Amendments to the Competition Act to enhance market regulation;
Implementation of the Treasury Single Account (TSA) and e-government procurement systems;
Faster approval mechanisms for County Government Additional Allocations Bills;
Regulatory frameworks supporting social protection programmes.
Although Kenya has made progress on some requirements including enactment of a Conflict-of-Interest Act aimed at strengthening governance the World Bank says several other conditions remain unmet, delaying the lending board’s approval and release of funds.
The funding delays come at a delicate time for Kenya’s public finances. The government faces a large budget deficit of around KSh 900 billion for the 2025/26 fiscal year, and public debt has swelled due to increased domestic borrowing, according to recent financial data.
Treasury Cabinet Secretary John Mbadi has stated that the government is in ongoing talks with the World Bank to hasten the release of the DPO funds and is working to meet outstanding reform conditions earlier than previously anticipated.
However, uncertainty remains over the timeline and outcome of both the IMF and World Bank engagements.
In light of the stalled IMF funding and the strict conditions attached, Kenya’s Treasury has omitted IMF financing from its national budget projections through 2029, signalling a cautious approach to future engagement with the Fund while maintaining cordial relations.
Observers say the funding freeze by the IMF and World Bank highlights the growing emphasis these institutions place on governance, fiscal discipline and structural reforms as prerequisites for concessional support a stance that Kenya’s government must navigate carefully in the months ahead.
