Kenya faces mounting challenges in securing affordable external financing as the country operates without active programs from key multilateral lenders, global credit rating agency Moody’s has warned.
The ratings agency cautioned that Kenya’s ability to service its debt obligations without depleting foreign currency reserves hinges critically on support from the International Monetary Fund (IMF) and World Bank.
Funding Drought Deepens
Kenya currently finds itself locked out of Sh96.9 billion ($750 million) in World Bank funding due to parliamentary delays in passing anti-corruption legislation. The funds remain frozen after senators blocked a tougher version of a conflict-of-interest bill that President William Ruto demanded to meet World Bank conditions.
Simultaneously, the country lacks an IMF program after the fund terminated its multi-year arrangement in March citing missed revenue targets and other unmet conditions.
Reserve Pressure Mounting
“An IMF programme would aid the strategy of meeting external debt service obligations without drawing down on the stock of reserves,” Moody’s noted. The agency emphasized that such programs not only provide direct financial support but also unlock additional funding from development partners while boosting market confidence.
Without multilateral backing, creditors view Kenya as a riskier proposition, potentially driving up borrowing costs at a time when the country needs to refinance maturing obligations.
Debt Dependency
Data shows the World Bank and IMF account for over 70 percent of Kenya’s multilateral debt, underscoring the country’s heavy reliance on these institutions. The Treasury projects tapping Sh170.5 billion annually from the World Bank through June 2029, highlighting the critical nature of restoring these funding relationships.
Treasury Cabinet Secretary John Mbadi acknowledged the precarious position, stating the government is “being very cautious” about assuming IMF funding while continuing engagement with the Washington-based lender.
The funding freeze threatens to force increased domestic borrowing or spending cuts, adding pressure to Kenya’s already stretched fiscal position.
