Come clean on hidden debt or no deal, IMF's new ultimatum to Ruto

The Ruto government’s push for a new IMF bailout faces a last-minute hurdle after the Fund raised fresh concerns about billions of shillings in potentially “hidden” public debt, dealing a blow to planned talks in Washington DC this week, according to two IMF assessment reports released by the Fund.

The Kenyan delegation led by Treasury Cabinet Secretary John Mbadi, Principal Secretary Chris Kiptoo and Central Bank of Kenya (CBK) governor Kamau Thugge had arrived in the US capital hopeful of a positive outcome, with Kenya scrambling for a bailout after months of rocky talks even as a fiscal crisis worsens amid the widening economic shocks and fallout from the Iran war. 

“CS Hon FCPA John Mbadi @JohnMbadiN, accompanied by PS @Kiptoock and @CBKKenya Governor Dr Kamau Thugge, today led Kenya's delegation in high level discussions with Kristalina Georgieva, Managing Director of the International Monetary Fund, at IMF Headquarters during the 2026 Spring Meetings,” said the National Treasury on X. 

“The engagement focused on Kenya's macroeconomic performance, reform priorities, and the evolving global economic outlook. The discussions took place against a backdrop of heightened global uncertainty, with particular attention to the spillover effects of the Middle East conflict on growth, inflation, financial conditions, and external vulnerabilities, especially for emerging economies.”

But the Fund’s technical arm has now pinpointed deep flaws in how Nairobi reports its true liabilities, warning that a narrow legal definition of debt could mask a significant portion of the country’s Sh12.8 trillion burden.

The reports, an April 2026 High-Level Summary and a detailed technical assistance assessment, conclude that while Kenya’s published debt statistics are broadly accurate, the Ruto government is “largely not observing” international standards on transparency. 

The key finding by the IMF is that Kenya’s constitution defines public debt too narrowly, as only loans or securities that charge the Consolidated Fund. 

This excludes a growing stock of other liabilities, including “pending bills” (unpaid supplier arrears) estimated by the IMF at Sh684 billion (nearly 4 per cent of GDP) as of March 2025.

“It is imperative that the Kenyan Government does not maintain only a narrow definition of public debt,” the IMF mission, led by David Bailey and Naoto Osawa, wrote after a July 2025 assessment.

“More comprehensive public debt statistics reports should be produced… to provide full transparency and address any user concerns of there being ‘hidden debts’.”

The reports also note that Kenya’s debt reporting excludes non-guaranteed borrowing by state corporations, county governments, and liabilities from securitization deals—such as a $3.5 billion conversion of Chinese railway debt into a securitised loan, which the IMF argues masks the true debt stock.

The fresh concerns could not have come at a worse time for President William Ruto’s administration, analysts say. 

Just weeks ago, Nairobi was projecting defiance. An IMF mission left Kenya in early March without a deal after the Fund demanded deep austerity and transparency over off-budget debt, conditions deemed politically toxic with a general election 18 months away.

President Ruto publicly pushed back, insisting Kenya would negotiate only on its own terms. “If we need your money, we will come for it. If we don’t need it, we will do with the resources we have,” he said on March 10.

But the eruption of the Iran-US conflict has dramatically shifted the calculus. As a net oil importer, Kenya has seen its current account hammered by surging crude prices.

The Central Bank of Kenya (CBK) on Wednesday last week slashed its 2026 growth forecast to 5.3 per cent and projected the current account deficit to widen to 3.0 per cent of GDP.

CBK Governor Thugge said a day after that Nairobi would resume intensive talks during the IMF’s Spring Meetings in Washington, adding, “We hope for a positive outcome.”

Behind the scenes, however, officials acknowledge the Iran shock has stripped away much of their bargaining power.

The IMF’s assessment highlights multiple discrepancies. Debt numbers reported by the National Treasury, CBK, and the Kenya National Bureau of Statistics are often inconsistent. While the differences are not large, the Fund warns they “undermine user confidence.”

The IMF also found that Kenya distinguishes between external and domestic debt based on currency rather than the residency of the creditor a deviation from international standards. 

Domestically issued debt held by non-residents is wrongly classified as domestic debt.

The Fund has now issued a series of priority demands.

They include expansion of debt reporting to cover all public entities, include pending bills and securitized revenue streams, and publish detailed metadata explaining what is, and isn’t counted.

Without a new programme, Kenya’s options are narrowing. Domestic borrowing remains expensive, and international markets are largely closed. The IMF has made clear that transparency is not negotiable.

“The legal frameworks specify clear oversight arrangements,” the IMF report notes, “but the Constitution limits the scope of public debt reporting.”