Treasury CS: Truth about our economy & why Kenya didn't factor IMF funds in budget

Cabinet Secretary for the National Treasury, John Mbadi, has revealed a significant strategic shift in Kenya's fiscal planning, confirming that the government deliberately did not factor International Monetary Fund (IMF) funds into the current financial year's budget.

This comes amid negotiations between the IMF and Kenya over a facility after its previous loan facility ended in early 2025.

In a candid interview, the CS outlined the status of ongoing negotiations, clarified misconceptions about "stalemates," and provided a detailed status report on the economy, which he described as having moved from "staggering" to a path of stability.

Addressing the lead concern regarding Kenya's fiscal relationship with the Bretton Woods institution, CS Mbadi was categorical that the exclusion of IMF funds was a calculated move to reduce reliance on the lender for direct financing.

“We did not factor in any IMF funding for this financial year, but that does not mean that we are disengaging from the IMF,” Mbadi stated. 

The CS emphasised that the primary value of the IMF lies in building investor confidence rather than providing liquidity. 

He noted that negotiations for a new program are at an advanced stage, following a fact-finding mission in September/October and engagements in Washington.

Mbadi dismissed reports of a deadlock with the IMF regarding the government's new securitisation model, specifically concerning the Road Maintenance Levy Fund. 

He clarified that the divergence is technical rather than fundamental.

“There is no stalemate. What IMF has asked us is that we should treat this [securitisation] also as debt,” Mbadi explained. 

While the government views the securitisation of the Sh25 per litre levy as selling an asset (rights to future cash flows) to a Special Purpose Vehicle (SPV), the IMF prefers it to be recorded as debt for transparency.

Mbadi noted that the World Bank has agreed with the Treasury's current approach, which has already facilitated the payment of 80% of historical pending bills to road contractors.

The CS painted a stark picture of the economy he inherited, describing it not as "limping" but "staggering and almost stumbling." 

He cited data from the International Institute for Management Development (IMD), which recently ranked Kenya as the best investment destination in Africa based on economic performance.

Mbadi highlighted key macroeconomic wins:

• Currency Stabilisation: The Kenyan shilling has strengthened from trading at over 160 against the dollar to stabilising below 130.

• Averting Default: Mbadi noted that of the six countries the IMF predicted would default on their loans, Kenya is the only one that survived and successfully derisked its environment.

• Debt Outlook: While acknowledging the country remains in "high debt distress," he emphasised the "positive outlook" rating, driven by the successful management of the 2027 and 2028 Eurobond liabilities.

Despite these macroeconomic improvements, the CS acknowledged the disconnect felt by citizens. 

“It is not instant coffee; it comes gradually,” he said, urging patience as macroeconomic stability trickles down to microeconomic relief.

As the country heads into a new year, CS Mbadi projected an economic growth trajectory moving from 4.7% to 5.2%. 

His message to Kenyans remains one of cautious optimism: the fundamentals are fixed, the bleeding has stopped, and the focus is now on productivity and value addition to ensure the common Kenyan feels the change.