IMF to Kenya: Anti-corruption reforms key to new funding deal

The International Monetary Fund (IMF) has released a long-awaited audit of Kenya’s corruption vulnerabilities, making its recommended reforms a central condition for resuming bailout talks with Kenyan government in February.

The move piles pressure on President Ruto’s administration as public debt surges past Sh12 trillion.

An IMF spokesperson told The Standard that a staff visit from Washington DC to Nairobi is scheduled for next month to continue discussions on a potential new financial programme.

The new IMF funding is seen as a critical lifeline for the Ruto government at a time it is grappling with revenue shortfalls and looming election-year spending pressures.

“A staff visit to Nairobi is scheduled for late February, and we will provide updates in due course,” the IMF spokesperson said in an interview.

The spokesperson said IMF staff have shared the draft Governance Diagnostic Report with Kenyan authorities for feedback. The report assesses structural institutional weaknesses that make the government vulnerable to graft and identifies priority reforms, rather than investigating individual cases.

“The report does not investigate individual corruption cases or allegations; instead, it assesses structural institutional governance weaknesses that make them vulnerable to corruption and identifies priority reforms,” the spokesperson said.

A new successful IMF deal -- which is the global lender of last resort -- is seen as essential to restoring investor confidence and unlocking affordable financing from other multilateral lenders. Failure would risk a deeper fiscal crisis, forcing even more severe austerity, economists and State officials reckon. 

“The ball is now firmly in Kenya’s court on governance reforms,” said a government official familiar with the talks, who requested anonymity due to the sensitivity of the negotiations. “The IMF has made it clear that a credible anti-corruption plan is the price of admission for further funding.”

The resumption of talks comes as Kenya’s stock of public debt has crossed the Sh12.8 trillion mark, exerting severe strain on the national Treasury. Debt servicing costs alone are projected to consume Sh1.66 trillion in the coming financial year.

This escalating debt burden collides with the government’s expansive spending plans detailed in the newly released 2026 Budget Policy Statement.

Treasury’s Sh4.73 trillion draft budget for 2026/27 aims to fund the “Bottom-Up” economic agenda but projects a larger fiscal deficit, requiring increased borrowing.

“The numbers are stark,” said Ian Njoroge, an independent economist. “Revenue growth is lagging, debt costs are soaring, and the IMF is demanding governance fixes before it opens its wallet. The government is caught between its populist promises and harsh fiscal realities.”

The IMF’s insistence on a governance diagnostic as a precondition marks a strategic shift. A previous $2.3 billion IMF programme was terminated in 2025 after Kenya failed to meet targets, cutting off a crucial funding line. Since then, Nairobi has relied on expensive commercial debt, including a high-yield Eurobond.

Ruto’s 2026 penultimate budget, ahead of the 2027 General Election, acknowledges the pressure, pledging to “strengthen governance and rule of law” and implement a “comprehensive programme of SOE reforms, including privatisation.”

It highlights the recent passage of the Government-Owned Enterprises Act, 2025, designed to improve oversight of state corporations, and plans to partially privatise several State Owned Enterprises including the Kenya Pipeline Company.

However, analysts question whether these steps will satisfy the IMF’s demand for deep, systemic change. “The diagnostic report will likely point to fundamental flaws in procurement, revenue administration, and the management of state-owned enterprises,” said a governance expert from a local civil society group. “Tinkering at the edges won’t be enough.”

The political stakes are immense for Ruto, with the next general election less than two years away. His administration faces widespread public discontent over high living costs and unmet job-creation pledges. Previous IMF-backed tax measures sparked deadly nationwide protests in 2024, forcing the government into a policy reversal.

“February’s talks are a make-or-break moment,” Njoroge said. “The IMF is handing Kenya a reform roadmap. The government must now prove it has the political will to follow it, even with an election on the horizon.”