CBK governor says Kenya can fund budget without IMF loan

Kenya anticipates fulfilling its Ksh987 billion borrowing need for the 2026/27 financial year without seeking new loans from the International Monetary Fund (IMF), according to Central Bank of Kenya (CBK) Governor Kamau Thugge. Thugge stated that rising foreign exchange reserves have alleviated the urgency for external balance of payments assistance.

During an MPC briefing, Thugge mentioned that Kenya's foreign exchange reserves were forecast to reach $15 billion by year-end, excluding any potential IMF financing. The CBK governor emphasized that Kenya could cover its external financing requirements without an immediate IMF loan, as the domestic financial market could mobilize the necessary funds for the National Treasury.

The Treasury had not incorporated IMF funding in its current financial year plan, indicating a readiness to meet budget obligations independently. Thugge highlighted that the Treasury estimated requiring Ksh987 billion for the current year, similar to the amount mobilized from the domestic market in the previous year. He expressed confidence in the domestic financial market's ability to fund government programs while allowing banks to extend credit to businesses, including SMEs and large companies.

However, a greater reliance on domestic borrowing could intensify competition for funds in the local market, potentially impacting businesses' access to financing and borrowing costs. Kenya's stance on IMF funding follows its pursuit of a new program with the lender after concluding its previous $3.6 billion arrangement in March 2025.

Nonetheless, Kenya has secured a separate $750 million World Bank budget support facility and plans to seek about Ksh127 billion from the World Bank and African Development Bank during the current year. These additional funds are subject to reforms and approval processes. While Kenya explores financing alternatives, it must still adhere to the terms of individual facilities and mobilize the remaining funds needed to finance public spending.

The IMF's recent delays in approving a successor program have been due to governance and corruption concerns. Concerns over corruption and weaknesses in public institutions have slowed negotiations for a new program, with the IMF seeking reforms to enhance governance and accountability.