Kenya aims to renegotiate its IMF program by Nov 2025 after fatal tax protests and economic strain from Trump-era U.S. tariffs, says top official Mudavadi.
Kenya is preparing to renegotiate the terms of its multibillion-shilling programme with the International Monetary Fund (IMF), as the government moves to calm public anger following deadly protests over punitive tax policies and lingering global shocks—including U.S. trade tariffs imposed during Donald Trump’s presidency.
In an interview with Bloomberg News in London on April 14, Prime Cabinet Secretary Musalia Mudavadi said Kenya would initiate formal talks with the IMF in the coming months, aiming to reach a new agreement by November 2025. The government, he said, is seeking a deal that reflects both Kenya’s economic realities and its political climate.
“We’re looking for a program that is fiscally sound but also socially sensitive,” Mudavadi told Bloomberg. “We want to stay the course on reform, but not at the expense of public stability.”
Although he didn’t reveal the proposed terms of the deal, his remarks come at a critical moment—when many Kenyans are demanding a rethink of the country’s fiscal path following recent street demonstrations that left at least 14 people dead and scores injured.
A Complicated Relationship with the IMF
Kenya’s engagement with the IMF stretches back to the 1970s, and has at times been fraught with tension. The Fund suspended its support in the 1990s due to governance and accountability concerns. But after a decade-long hiatus, cooperation resumed in the mid-2010s amid rising debt levels and growing external financing needs.
In April 2021, the IMF approved a $2.34 billion (Sh311 billion) arrangement for Kenya under its Extended Credit Facility (ECF) and Extended Fund Facility (EFF). The program was later increased to $3.6 billion (Sh480 billion) and has so far disbursed more than $2 billion (Sh267 billion).
The aim was to support Kenya’s economic recovery from the COVID-19 pandemic and to help Nairobi stabilise its rising debt levels, which hit Sh11.1 trillion ($82 billion) as of February 2025—roughly 69% of GDP.
Yet the IMF-backed reform agenda has come under heavy fire. A raft of tax measures introduced under the Finance Act 2023, including housing levies and VAT adjustments, sparked widespread public protests in July 2023 and again in March 2024.
Rights groups and opposition leaders say the burden of reform has fallen disproportionately on the poor and working class.
“You cannot squeeze blood from a stone. The government is punishing hustlers while shielding cartels,” said Embakasi East MP Babu Owino during a protest in Nairobi.
External Headwinds
Adding to the domestic discontent are trade shocks tied to Trump-era tariffs. Despite President Joe Biden’s partial rollback of these levies, Kenyan exports—especially textiles and horticultural products—continue to face access challenges in U.S. markets.
Figures from the Kenya National Bureau of Statistics show that exports to the U.S. fell by 6.4% in 2024, while the trade deficit with America widened. At the same time, the shilling lost 9.3% of its value against the dollar last year, intensifying the country’s external debt burden.
Walking a Tightrope
IMF officials maintain that Kenya’s economic reform programme is making progress, particularly in reducing the budget deficit—expected to fall from 5.7% of GDP in FY2023/24 to 4.1% in FY2024/25.
“Kenya has demonstrated a strong commitment to fiscal reforms, but social safeguards must be strengthened,” said Haimanot Teferra, IMF Mission Chief for Kenya, in a January 2024 statement.
However, economic analysts warn that too much austerity could jeopardise political stability.
“If Kenya tightens too hard to please the IMF, it risks another round of street protests. But if it backtracks on reforms, it loses international support,” said Kwame Owino, CEO of the Institute of Economic Affairs (IEA-Kenya). “It’s a very narrow path.”
What Lies Ahead
As the country prepares for talks with the IMF over the coming weeks, the Ruto administration is under pressure to recalibrate its economic priorities—balancing fiscal responsibility with the need to maintain public trust.
The outcome of these negotiations could shape Kenya’s economic trajectory for years to come, determining not just the flow of international financing, but also the political temperature at home.
