Economy

📍 Nairobi, Horn Daily | August 13, 2025

Kenya is seeking a new funded program with the International Monetary Fund (IMF) as the country faces growing fiscal pressures, Central Bank Governor Kamau Thugge said on Wednesday.

The announcement comes after Kenya missed out on the final $800 million disbursement from a previous $3.6 billion IMF arrangement, following the government’s rollback of contested tax measures and failure to meet fiscal targets.

Governor Thugge noted that Nairobi prefers a fully financed agreement rather than a non-funded or technical program, saying such support is necessary to strengthen external reserves and meet upcoming debt obligations. An IMF delegation is expected in Nairobi next month for negotiations.

Economic Pressures

Kenya’s public debt has climbed to more than 70 percent of GDP, while inflation and currency volatility have added to investor concerns. Earlier this year, protests against new tax measures turned violent, forcing the government to withdraw several planned increases.

Analysts say the government now faces the challenge of balancing fiscal reforms with public acceptance, as additional austerity could provoke further unrest.

Regional Implications

Kenya is the region’s largest economy after Ethiopia and serves as a trade and financial hub for the Horn of Africa. Its stability is seen as critical for neighboring countries that rely on Kenyan ports, banks, and infrastructure.

Observers note that a credible IMF agreement could help restore investor confidence and provide a buffer for the wider East African region, where economies are also struggling with high debt and external shocks.