IMF to share Kenya governance diagnostic draft with government

Treasury CS John Mbadi accompanied by PS Chris Kiptoo led the Kenyan delegation in talks IMF team led by Vitor Gaspar, Director of the Fiscal Affairs Department, and Yan Liu, Director of the Legal Department, during the 2025 Spring Meetings. [Courtesy]

The International Monetary Fund (IMF) has made governance reforms and anti-corruption measures a cornerstone of its future financial support to Kenya, with a draft report assessing the country's corruption risks expected by December 2025.

In a statement to The Standard, IMF Spokesperson Julie Kozack confirmed that "promoting good governance remains an essential part of the IMF's engagement with Kenya," signalling that future funding could hinge on the government's commitment to reforms.

An IMF governance diagnostic team wrapped up its assessment on June 30, following an initial scoping mission in March.

The team engaged with government officials, private sector leaders, civil society groups, and development partners to "evaluate systemic weaknesses in key areas, including public financial management, procurement, tax administration, and Central Bank governance."

The IMF clarified that the exercise is a voluntary "capacity-building tool", not an audit, aimed at helping Kenya identify and address corruption vulnerabilities.

"The Governance Diagnostic is not a corruption audit," Kozack emphasised in emailed responses to The Standard. "It is designed to strengthen integrity frameworks and provide actionable recommendations."

A draft report will be shared with Kenyan authorities for feedback before year-end, with its final publication subject to government approval.

Analysts say the findings will likely shape future IMF loan conditions, directly tying financial assistance to anti-graft progress.

Kenya's public debt has surged to a record Sh11.5 trillion, exacerbating fiscal strains and increasing reliance on IMF support.

Central Bank Governor Kamau Thugge had earlier said talks for a new IMF programme are underway, with a team expected in September for an Article IV consultation.

Public discontent over corruption and economic mismanagement has intensified, culminating in protests that forced the government to withdraw the Finance Bill 2024. In response, President William Ruto's administration announced a "comprehensive corruption audit" across all ministries-a move Prime Cabinet Secretary Musalia Mudavadi called proof of the government's "unwavering resolve to eradicate graft."

The IMF has previously delayed disbursements over governance concerns, insisting on policy changes before further aid.

Kozack reiterated that while reforms take time, they are "essential to our engagement with Kenya." With Kenya's 2025/26 budget projecting a Sh923.2 billion deficit, the IMF's push for transparency sets a tough but necessary path for the Government to secure affordable financing. Analysts warn that without tangible reforms, critical funding could remain out of reach.

Corruption has long been a significant barrier for the IMF in releasing funds to Kenya. Despite prior discussions, the Fund has refrained from announcing new funding, urging Kenyan authorities instead to undertake these diagnostics.

Financial assistance

This will be a fresh test for President Ruto, who has faced mounting pressure to deliver on economic promises amid rising discontent.

The lack of immediate financial assistance underscores the IMF's stance that new policies are a prerequisite for any future funding, experts say.

National Treasury Cabinet Secretary John Mbadi, while making his budget speech, highlighted fiscal constraints including rising demands for public spending, public debt accumulation, and the challenge of mobilising higher tax revenues while maintaining a low cost of doing business.

"These constraints are interlinked, and addressing them effectively requires strategic planning, fiscal discipline, and a commitment to long-term sustainability," Mbadi stated in his budget address, emphasising a fiscal consolidation plan to slow debt growth while protecting service delivery.

The National Treasury plans liability management operations and a continued pursuit of concessional loans, while exploring new funding instruments such as debt swaps and diaspora bonds.