Kenya has excluded the International Monetary Fund (IMF) from its budget plans for the financial year starting July 2025, opting instead to expand its engagement with the World Bank. Parliamentary budget documents show no provision for IMF financing through June 2029, in contrast to the Sh135.1 billion received in the 2023/24 fiscal year and Sh50.2 billion planned for 2024/25. Meanwhile, World Bank financing is projected to rise to Sh170.5 billion annually over the next four years, up from Sh129.8 billion in the current fiscal period.
This preference comes as Kenya seeks to avoid the politically unpopular terms typically attached to IMF support, conditions that have previously required immediate tax increases, job freezes, and spending cuts.
Here are six key reasons why Kenya is leaning more heavily on World Bank loans than IMF funding.
1. Less Demanding Loan Conditions from the World Bank
World Bank loans, particularly through Development Policy Financing (DPF), are long-term and focus on development projects and structural reforms such as governance and poverty reduction. While not entirely free from requirements, these conditions tend to be legislative and long-term in nature, such as the introduction of the Conflict of Interest Bill, 2025, rather than urgent fiscal overhauls.
In contrast, IMF facilities like the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) are designed for short- to medium-term macroeconomic stability and often demand swift and politically sensitive reforms, including tax hikes, subsidy cuts, and restructuring of state-owned enterprises. Kenya’s recent budget proposal notably avoided new major tax increases, a move that would have been unlikely under active IMF conditions.
2. Avoidance of Politically Costly Reforms
In 2024, Kenya experienced widespread unrest after proposed IMF-backed tax hikes worth Sh346 billion were included in the Finance Bill. Protests led by young people resulted in over 50 deaths and eventually forced President William Ruto to withdraw the bill. This incident highlighted the domestic political cost of implementing IMF reforms.
The current 2025/26 budget reflects this concern by avoiding new major taxes, aligning with public sentiment. World Bank loans offer more flexibility in fiscal planning, allowing Kenya to maintain its debt management targets without triggering another wave of social unrest.
3. Favorable Loan Terms and Debt Sustainability
World Bank lending, particularly through the International Development Association (IDA), provides concessional loans with lower interest rates and repayment periods of up to 40 years. For example, a $1.2 billion DPF approved in May 2024 included a $300 million IDA credit and a $50 million grant, terms that reduce debt servicing pressure.
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In contrast, IMF support is often more expensive and has shorter repayment timelines, typically between three and ten years. Though IMF loans helped Kenya avoid a Eurobond default in 2024, they are less suited to long-term development and infrastructure financing. Kenya’s debt strategy now emphasizes concessional borrowing and reduced foreign debt exposure, making World Bank terms more suitable.
4. Completion of the IMF Program and Budget Realignment
Kenya and the IMF concluded their 38-month EFF/ECF program in March 2025 without completing the final review, which could have unlocked up to $850 million in funding. According to Treasury CS John Mbadi, the review was dropped due to timing constraints rather than disagreements. Kenya’s failure to meet key conditions, such as addressing irregular spending of fuel levy collections and unresolved issues at state-owned enterprises like Kenya Airways, meant the review was not conducted.
Though a new IMF program is under discussion to access remaining resources, the Treasury appears to be prioritizing alternative financing from the World Bank, African Development Bank (AfDB), and other concessional lenders over IMF support.
5. Public and Political Backlash Against IMF Terms
The IMF has become a flashpoint for public criticism, particularly after the 2024 Finance Bill protests. Many citizens accused the IMF and other lenders of imposing conditions that burden low-income households. The IMF’s association with tax increases and subsidy cuts made it a target for frustration, while World Bank-funded projects are seen as more beneficial, focusing on infrastructure, climate resilience, and social protection.
Social media platforms such as X (formerly Twitter) have amplified these sentiments, with many praising the government for relying more on World Bank loans, which are viewed as less intrusive and more aligned with the public interest.
6. Alignment with National Development Goals
World Bank financing supports projects that match Kenya’s development priorities, such as green growth, education, and social protection. The $1.2 billion loan package approved in 2024 included components for environmental sustainability, refugee integration, and poverty alleviation.
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IMF support is largely geared toward achieving macroeconomic targets such as currency stability, fiscal discipline, and reserve adequacy. While important, these objectives do not always directly contribute to Kenya’s long-term plans under Vision 2030 and the Sustainable Development Goals (SDGs).
Historical Relationship: From SAPs to Modern Engagement
Kenya’s interaction with the IMF and World Bank has evolved over decades. In the 1980s and 1990s, both institutions promoted Structural Adjustment Programs (SAPs) that demanded trade liberalization, currency devaluation, and spending cuts, policies that drew heavy criticism for deepening poverty and reducing public trust.
Under President Mwai Kibaki, Kenya moved away from IMF budget support and focused on World Bank project loans. Since 2020, however, IMF lending resumed strongly in response to post-COVID fiscal challenges. Between 2020 and 2024, IMF disbursed over $3.1 billion to Kenya, including emergency funds under the Rapid Credit Facility and longer-term programs like the Resilience and Sustainability Facility.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.