IMF in town again: Kenya's dj vu dance with debt prescriptions begins

In what was a very American week for Kenya with UNGA@80, Haiti, Meg Whitman et al, we also got to quietly learn that the IMF is back in town (do they ever leave, they have an office here, right?).  Last Wednesday’s presser from Washington DC was short and sharp.  Basically, an IMF team will spend a fortnight in Nairobi – between September 25 and October 9 – “initiating” discussions with the Kenyan authorities (government) on a “possible” IMF-supported program. 

This is obviously serious business for us, but let’s begin with a lighter look at this communication. 

Not “progressing” but “initiating”? Remember when our Treasury people told us they didn’t want any gaps between the previous program and any future one?  That was over six months ago.  Oh, and it’s not a “new” (fresh), or “probable” (likely), but “possible” (maybe) program?  Or is it? 

On the Frequency Asked Questions (FAQs) posted on the IMF website on the same day as this presser we are told “Kenya has formally requested a new IMF-supported program, and preliminary discussions are underway”. OK, so IT IS “new”, but what’s then being “initiated” if discussions are underway?  This may sound like semantics but it speaks to process transparency.  

Especially when those FAQs then inform us that “the IMF is currently working with Kenyan authorities to review recent developments and update the macroeconomic assessment while awaiting details on the authorities' (new?) priorities for the (new) program”.  Are we saying “the authorities” will present new priorities to the IMF if we, the people, haven’t signed them off? 

Recall, as the presser did, these discussions are “at the request of the Kenyan authorities”.  They didn’t call us, we called them.  Yes, we aren’t power players in the global aid-trade-debt-finance matrix, but when you want a loan, you go to the bank, the bank doesn’t come to you, right? 

For this two-week visit, the IMF anticipates “constructive engagement with the authorities and other stakeholders during our visit to Nairobi.”  Again, for transparency, shouldn’t we, through Parliament, demand a public participation report from this engagement? It isn’t just with the IMF, but we (the people and parliament) are always in the dark on our debt/finance deals. Also, shouldn’t this IMF team “engage” across Kenya, not just Nairobi? 

Imagine a day in the future when engagements are held across our four broad economic geographies (regional economic blocs) - Nairobi that is 28 per cent of GDP, The West (of Nakuru, that is Rift (NOREB) and West (LREB)) also at 28 per cent, Mt Kenya (CEREB) at 24 per cent and The Rest (which I call The Beltway – NAKAEB, SEKEB, JKP and FCDC) at 20 per cent!  I digress, but shouldn’t we see Kenya as more than “one big blob” in our debt discourse?

Anyway, if we take a wild guess, this IMF team will probably meet 100 to 300 (if in groups) people during their visit, so you and I individually have a 0.0002 to 0.0006 per cent (that is, two to six in a million) chance of “engaging”. Let’s instead offer a couple more light reflections today. 

Beginning those FAQs.  First, we learn that “the authorities” want to “prioritize discussions on their program request” and leave the 2025 Article IV “macro-economic health check” for later.  We’ll also get a full Debt Sustainability Analysis “later”. At the same time, as earlier noted, there is an ongoing review of developments and a macro update. 

I’m not interested in procedural technicalities here – the sequencing is feasible – but overall logic.  The tone of this request sounds like someone who goes to the doctor feeling sick, and then demands that the doctor dishes out fast-acting medicine, without a complete diagnosis. 

In reality, it means we are probably desperate for new IMF funding, as well as the IMF “stamp of approval” as a signal to markets while unlocking other foreign funding, like the World Bank’s. 

You only need to look at government’s huge appetite for domestic borrowing plus its new-fangled financial engineering to confirm this.  Clearly, we are still “in receivership”, as we were learnt from civil society in 2021 when the last program was launched.  So much for “we have stabilized the economy”! The sub-text here, as some suggest, is our over-valued shilling can no longer hold. 

The final FAQ notes that a draft report from the ongoing governance diagnostic assessment – which is not a corruption audit - will be made available to “the authorities” before the end of 2025, even as civil society offers us its shadow version. It isn’t rocket science to conclude that the findings of this “voluntary” assessment should feed into a new program that starts after 2025. 

We must speculate here, because we lack the full facts.  Take the previous program abruptly abandoned early this year.  We forget that it kicked off in 2021 amid much public controversy. 

200,000 Kenyans signed a written petition to the IMF to halt the original $2.3 billion program that eventually became $3.9 billion, but was abandoned at $3 billion.  If we recall, the Jubilee administration tried to convince Kenyans that the program was a sign of our “economic health”. 

Then we had “in-program” controversies relating to the 2021, 2023 and 2024 Finance Bills.  To what extent did the IMF’s fiscal consolidation, actually deficit, benchmarks drive revenue targets and these bills, especially in 2023 and 2024 (which is not to say that wasteful government – from Jubilee to Kenya Kwanza - was innocent in the matter)?  What lessons have we all learnt here? 

Finally, are we looking at a program from the IMF “boilerplate” of macroeconomic stability and debt sustainability which ends up being another revenue (and tax) driven fiscal consolidation? Remember, the IMF is waiting to hear our priorities.  Can we do a “home grown” program? 

If so, it might pick a few ideas from the World Bank’s May 2025 Public Finance Review which proposes a third pathway for Kenya – away from “business as usual” or the political impossibility of severe austerity – that pursues a fiscal consolidation that “addresses fiscal imbalances and weak governance, low progressivity of the budget, and productivity and job challenges”.  The Bank, of course, is the IMF’s Siamese twin, so you want to buy the ideas before you take the money. 

But we might also go to the radical stance offered by Kenya’s Institute of Economic Affairs (K Owino, M Barasa and P Doyle).  It is impossible to do justice to their work in this short column, but they make good points on a new program after noting that the previous one was badly designed, and its real collapse was the June 2024 Finance Bill protests.  They offer three pathways.  

First, give up growth potential and continue the IMF’s (failed) debt sustainability program framing, with revenue-led fiscal retrenchment.  Second, forget the IMF and “go it alone”.  Third and preferred, push for a reimagined IMF program oriented to growth potential, including a debt-write off.  In their view, the first ignores political economy reality, the second market reality. 

The bottom line is we need an IMF program now, whether we like it or not.  The only remaining question is if it is WANTAM or TUTAM that decides when the program starts or vice versa!