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Kenya is in discussions with the World Bank, the African Development Bank (AfDB) and other multilateral lenders to secure additional financing expected within the current financial year, according to Central Bank of Kenya Governor Kamau Thugge.
The talks include potential budget support and a World Bank Development Policy Operation (DPO), as the East African country explores funding options expected to materialise by June 2027. Thugge also discussed the possibility of a new International Monetary Fund (IMF) programme and outlined inflation risks that could influence the central bank’s future monetary policy decisions.
Kenya explores budget support from multilateral lenders
Speaking in an interview on the sidelines of the IMF-World Bank Annual Meetings in Bangkok, Thugge said the government was engaging several development finance institutions to access external funding.
“They are looking at all kinds of financing… there’s quite a number of sources that they are trying to access,” he said.
The expected financing window runs from the time of the interview through June 2027, with discussions covering potential support from the World Bank and AfDB.
Kenya is also considering a debt-for-food swap, although Thugge did not provide further details, noting that he was not directly involved in those discussions.
The financing negotiations come as the government considers options to meet its funding needs while managing the cost and availability of borrowing.
World Bank emergency funding and possible IMF programme
Kenya is also expected to receive approximately $400 million in emergency financing from the World Bank, according to a Reuters report published in September. The funding is intended to help address risks that include an Ebola outbreak in the region and disruptions associated with El Niño weather conditions.
Separately, an IMF team is expected to visit Nairobi in December for a routine Article IV consultation. Thugge said discussions about a possible new programme with the Fund would form part of the engagement.
Although IMF financing is not currently included in the government’s funding plans, the central bank governor said it could provide significant benefits if secured.
“The IMF funding is not in any of our planning. But obviously, were it to come in, it would help in several ways,” Thugge said.
He explained that concessional IMF financing would generally be cheaper than alternative funding sources, particularly domestic borrowing. It could also reduce the government’s reliance on local credit markets, potentially creating more room for banks to lend to private businesses.
The potential impact on private-sector credit is important because government borrowing can compete with businesses for available domestic financing. Access to lower-cost external funding could help ease some of that pressure, depending on the scale and terms of any eventual financing arrangement.
Central bank monitors inflation and currency pressures
Thugge said the central bank would continue monitoring consumer prices, developments in the Middle East conflict and weather conditions before deciding on its next monetary policy move.
The Central Bank of Kenya kept its benchmark lending rate at 8.75% at its October policy meeting, maintaining the rate for the fourth consecutive meeting. At the time, the bank said inflation was expected to remain within its target range in the short term.
However, Kenya’s energy regulator subsequently raised the maximum retail prices of petrol and diesel, citing higher import costs linked to the conflict in the Middle East.
Thugge also identified rising bond yields in developed markets as a potential indirect source of inflationary pressure. Higher yields could weigh on the Kenyan shilling, increasing the domestic cost of imported goods and commodities.
“Definitely risks are tilted (to the upside),” he said.
Despite the pressure from fuel prices, Thugge noted that food prices had been trending downward. He said the central bank would need to assess whether further declines in food prices could offset any increase in fuel-related inflation before determining the appropriate policy response.
The outlook therefore remains dependent on how energy costs, food prices, exchange-rate movements and broader international developments evolve.
Kenya maintains stronger economic growth outlook
Thugge projected that Kenya’s economy would expand by 5% in 2026 and 5.3% in 2027, exceeding the IMF’s forecasts of 4.5% and 4.7%, respectively.
He attributed the stronger domestic outlook to favourable conditions in agriculture, industry and services.
“It’s likely our projection is closer to the truth than the IMF one,” he said.
The difference between the central bank’s projections and those of the IMF highlights differing assessments of Kenya’s growth prospects. The final outcome will depend on the performance of key sectors, domestic economic conditions and external risks, including energy prices and financing costs.
External financing remains central to Kenya’s fiscal outlook
Kenya’s discussions with multilateral lenders could provide additional options for financing government needs during the current financial year. However, the timing and scale of any support will depend on the outcome of negotiations and the terms attached to individual facilities.
At the same time, the central bank faces the challenge of balancing its growth outlook against inflation risks stemming from fuel prices, currency movements and global financial conditions.
The combination of external financing discussions and continued inflation monitoring places both fiscal funding and monetary stability at the centre of Kenya’s near-term economic outlook.
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