The government now seeks to roll over about Sh88 billion as part of the funding attached to the last disbursement under the ongoing financing programme with the International Monetary Fund (IMF) to the next financial year, an indication it plans a fresh financing deal with the multilateral lender once the current one lapses in April.
The Treasury disclosed this in the Budget Policy Statement 2025 tabled in the National Assembly last Thursday.
A rollover is the renewal of a loan. Instead of liquidating a loan on maturity, you can roll it over into a new loan. The outstanding principal and other components of the old loan are rolled over with or without the interest outstanding on it.
Data in the tabled Budget Policy Statement shows that expected disbursement from the IMF under the ongoing Extended Credit and Extended Fund Facility for the current financial year (2024-25) has been revised downward from the initial Sh138.3 billion to Sh50.2 billion, a 63.7 percent reduction.
This means that the new programme if secured by Kenya, will be kicking off with at least Sh88.1 billion worth of financing deferred from the last instalment of the ongoing programme due to lapse in April.
“We are discussing with the Fund the possibility of a new programme that can sustain the reforms we have been undertaking under the current programme. If we agree with the Fund, we may roll over the balance of the funding to the new programme,” Treasury’s director-general for Budget, Fiscal and Economic Affairs, Albert Mwenda, told the Business Daily.
“The reason we are starting negotiations for a new programme early and even before the conclusion of the current one is to ensure a smooth transition.”
This comes at a time when the Treasury has rejigged the 2024-25 spending plan, with the dispatch from the Cabinet on February 11 indicating that total expenditure is expected to increase by Sh199 billion under Supplementary Budget II due for tabling in the National Assembly next week even as the projection for total revenue has been retained at Sh3.06 trillion.
“Cabinet also approved the proposed 2024-25 Supplementary Estimates No.2 authorising an additional Sh199.9 billion. These funds will address government and externally funded projects, personnel emoluments, budget realignment, and revenue adjustments,” stated the Cabinet dispatch.
Owing to the changes in the expenditure and revenue projections for 2024-25, the fiscal deficit projection for the current financial year has been widened from the Sh768.7 billion provided for under Supplementary Budget I to Sh862.7 billion under Supplementary Budget II.
The Treasury indicates that it is considering a funded programme (one with a loan component attached to it) as one of the viable options for a successor programme with the IMF once the current one lapses.
“Discussions with the Fund are at early stages and there will be many considerations and a funded programme is also an option on the table,” says Mr Mwenda.
Kenya has received eight disbursements worth Sh415.1 billion under the ongoing programme with the IMF, with the largest disbursement being Sh80.7 billion in November 2023 after the sixth review.
The latest disbursement from the IMF suffered delays following the withdrawal of Finance Bill 2024. This necessitated the release of Sh78.3 billion to Kenya following the conclusion of the combined seventh and eighth review of the programme in November 2024.
The tabled Budget Policy Statement 2025 further shows that the government has put forward a raft of measures through which it looks to bridge domestic revenue mobilisation challenges in the current financial year.
First, the target for domestic borrowing increased from the Sh413.1 billion introduced through Supplementary Budget I to Sh593.7 billion, a steep 43.7 percent increase.
Second, the government has revised the amount it targets to raise through commercial loans in the global markets from the Sh168.8 billion captured in Supplementary Budget I to Sh195.0 billion in Supplementary Budget II, reflecting a 15.5 percent increase in the targeted amount.
Third, the government now expects a larger disbursement from the World Bank than initially projected. Whereas Supplementary Budget I had provided for Sh123.9 billion from the World Bank under the current financial year, Supplementary Budget II now provides for Sh130.3 billion, a 5.2 percent increase.
