Ruto back to begging IMF as country struggles with debt, empty coffers

CBK Governor Dr Kamau Thugge at Bunge Towers, Nairobi on July 21,2026. [Elvis Ogina, Standard]

Kenya is bracing for a fresh round of International Monetary Fund (IMF) talks that could impose painful conditions on voters just months before a general election, as President William Ruto's administration once again extends the begging bowl to Washington.

President William Ruto’s government abandoned its previous $3.6 billion International Monetary Fund (IMF) programme in March last year after missing various performance targets, which resulted in the cancellation of the ninth review and the loss of roughly Sh110 billion in expected funding plunging the country into a budget crisis.

However, the Ruto administration has resorted to Bretton Woods amid mounting public debt and fiscal pressures.

Central Bank of Kenya (CBK) Governor Kamau Thugge said on Wednesday that an IMF staff team was expected "shortly" in Nairobi to initiate Article IV consultations, a mandatory surveillance exercise that allows the fund to assess the country's economic health and financial policies.

"We expect an IMF team to visit Nairobi shortly, initiating the Article IV consultation discussions," Thugge told a press conference following the Monetary Policy Committee briefing. "In the context of those consultations, we will have further discussions about our relations going forward and in particular in terms of having a fund-supported programme."

The visit, expected in the coming weeks, signals that Nairobi is seeking a new lending arrangement after its previous $3.6 billion (Sh464.4 billion) programme ended in April 2025. The Ruto’s Treasury has already omitted IMF funding from the national budget for the year starting July, wary of the tough conditions attached to any new deal.

But with a Sh1.1 trillion  budget deficit to plug and multilateral funding frozen for much of 2026, the government has few options left, analysts say.

The World Bank only recently unlocked a $750 million (Sh97.1 billion) loan in late June after months of delays over governance concerns, while the African Development Bank approved a €293.88 million (Sh43.3 billion) facility on July 8. Yet these inflows cover barely 12 per cent of the fiscal gap.

The financial crunch comes as nearly four years into his presidency, Ruto's grand campaign pledges to the "hustler nation" remain largely unfulfilled.

A review by The Standard earlier showed that Kenyans are significantly poorer today than when he took office, with basic goods costing far more despite his 2022 promise to immediately lower maize flour prices, slash fuel taxes, and reduce a 6kg cooking gas cylinder to just Sh500.

Kenya National Bureau of Statistics data shows annual inflation accelerated to 6.5 per cent in July, up from 6.4 per cent in June. Food and non-alcoholic beverages, accounting for nearly a third of household expenditure, recorded 9.0 per cent inflation, while transport costs surged 15.6 per cent year-on-year.

A kilogramme of sukuma wiki (kale) now costs Sh116, a 26.8 per cent jump from a year earlier. Tomatoes have soared 33.7 per cent to Sh113 per kilogramme. Diesel in Nairobi still retails at Sh224, up a staggering 29.7 per cent from Sh173 in July 2025. The gap between Ruto's rhetoric and reality has fuelled growing anger among the market women, boda boda riders and young job-seekers who formed his political base.

The economic outlook has darkened further  with the rapid expansion of the Middle East conflict. Global crude prices have surged past $112 per barrel after Houthi rebels attacked Saudi oil tankers in the Red Sea, adding a second major shipping chokepoint to the already volatile standoff over Iran's closure of the Strait of Hormuz.

Murban crude, Kenya's main price benchmark for fuel imports, has jumped more than 22 per cent in just days. Energy experts estimate that every $1 increase in Murban crude adds roughly Sh2.6 to a litre of fuel in Nairobi, meaning the recent $22 jump could theoretically add over Sh57 per litre if fully passed on to consumers.

The CBK has warned that inflation could hit 8 per cent if global oil prices average $110 per barrel amid a prolonged conflict, breaching its 2.5-7.5 per cent target range.

Any new IMF programme faces a significant roadblock government officials and IMF insiders admit.

The Fund completed a Governance Diagnostic Assessment Report nearly a year ago examining corruption vulnerabilities across the Ruto government, but Kenyan authorities have yet to respond to the draft.

"We are awaiting their comments," IMF Communications Director Julie Kozack told reporters in June. Without Kenya's consent, the report stays secret, and without its completion, there is no new IMF programme.

The transparency hurdle has tightened further. In April, the Fund's technical arm issued two assessment reports revealing that Kenya is "largely not observing" international standards on debt transparency. The IMF identified a flaw in Kenya's constitution it defines public debt too narrowly, excluding a mountain of hidden liabilities.

Among them include Sh684 billion in pending bills (unpaid supplier arrears), a $3.5 billion securitized conversion of Chinese railway debt, and a growing stock of non-guaranteed borrowing by state corporations and county governments.

"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 irony is significant, analysts say.

Just weeks before the Iran conflict erupted, President Ruto had publicly pushed back against IMF demands, 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.

Behind the bravado, officials had privately expressed caution that with a general election due in under 18 months, IMF demands for austerity could reignite the kind of deadly protests that forced a humiliating policy reversal on tax hikes in 2024.

The Iran shock changed the calculus dramatically. As a net oil importer, Kenya saw its current account hammered by surging crude prices. Long queues snaked back at petrol stations.

The CBK slashed its 2026 growth forecast to 4.9 per cent and projected the current account deficit to widen sharply. By April, Thugge was in Washington, publicly softening his tone and admitting Nairobi would resume intensive talks.

"The government finds itself trapped between two irreconcilable forces," said Ian Njoroge, an independent economist based in Nairobi. "The IMF demands fiscal consolidation higher taxes, subsidy cuts, restructuring of state enterprises. The election demands the opposite, populism, spending, relief. Kenya cannot afford both, and the 2024 protests have shown that citizen resistance to austerity has become politically ungovernable."

Analysts point to the graveyard of IMF programmes in election-year contexts. In Sri Lanka, a new leftist government swept to power in late 2024 on a platform to renegotiate the island's $2.9 billion IMF bailout only to quickly reverse course, swallowing the bitter medicine of tax hikes and state enterprise restructuring when it realized the economy was too fragile to risk deviation. In Pakistan, the pattern is textbook they say.

Governments implement painful reforms for two years, then abandon them as elections approach, only to return to the Fund in crisis.

Kenya's own recent history offers an even more chilling preview analysts say.

Previous attempts to implement IMF-backed tax hikes in the 2024 Finance Bill sparked deadly, youth-led protests that forced the government to retreat. The combined weight of new mandatory deductions the Affordable Housing Levy, the Social Health Insurance Fund (SHIF) demanding 2.75 per cent of gross salary with no upper ceiling, and NSSF contributions ballooning to Sh6,480 per month for high earners has already left salaried employees with severely diminished spending power.

The IMF's demand for transparency on hidden debt adds another hurdle. To secure the bailout, President Ruto must now formally admit to billions in off-budget debts that his administration has previously declined to fully disclose. Publishing a comprehensive debt registry including the opaque Chinese railway securitisation would hand his political opponents a devastating narrative that he has been hiding the true scale of Kenya's Sh12.8 trillion burden.

"President Ruto is cornered because the begging bowl is being extended at the very moment the political system is least equipped to fill it," said Njoroge. "Publishing that governance report is a political liability. Not publishing it means no deal. Without the deal, fiscal collapse looms. With the deal, political collapse threatens. There is no third way."

Without a new IMF programme, Kenya's options are narrowing sharply. The Treasury is leaning almost entirely on domestic borrowing to finance the deficit planning to source 90 per cent of its Sh1.1 trillion financing gap from local banks. Financial analysts warn that this aggressive push is already crowding out private sector credit, choking small and medium enterprises.

"History shows that when the government borrows heavily domestically, banks reallocate portfolios toward sovereign debt," Njoroge said. "The private sector is left fighting for scraps. Every percentage point increase in the T-bill rate translates directly into higher loan costs for small businesses and households."

Data supports this. In the year to June 2025, banks allocated Sh376.2 billion to government securities while net private sector credit grew just 2.2 per cent well below historical averages of 8-10 per cent before recovering to 10.2 per cent recently.

Experts estimate that for every shilling the government borrows, private sector credit falls by roughly Sh 15.

Ruto had also targeted pension funds with the National Social Security Fund  investing nearly Sh10 billion as an equity stake in the Nairobi–Rironi–Mau Summit toll road project.

With the next General Election scheduled for August 10, 2027 just over 12 months away the cost of living remains a key voter concern. The government is under intense pressure to rein in the runaway cost of living, yet every policy lever available carries political risk.

The Kenya Revenue Authority has persistently missed its tax collection targets, widening the fiscal pressure. By the end of March 2026, KRA had collected Sh2.038 trillion against a target of Sh2.122 trillion over nine months—a shortfall of Sh84 billion.

The missed targets have been compounded by tax concessions, including the halving of value-added tax on petroleum products, estimated to cost the exchequer about Sh12.9 billion over three months.

"The IMF has made clear that any new programme would require a 'credible fiscal consolidation path' a phrase that in practice means higher taxes, reduced subsidies, and restructuring of loss-making state enterprises," said a sitting ruling party MP who requested anonymity due to the sensitivity of the matter. "Those are not the promises of a candidate seeking re-election."

For the mama mbogas and boda boda riders who carried Ruto to State House, the reality nearly four years into his presidency is one of persistent struggle, they say. The "hustler" narrative has given way to quiet but growing anger over broken promises, rising taxes, and an economy that continues to squeeze the very people he vowed to uplift.

As one viral social media post put it: "The man who promised to lower prices has presided over an avalanche of new levies and stagnant wages, leaving Kenyans demonstrably poorer and more frustrated than they were in 2022."

Analysts say the IMF team's arrival in Nairobi will test whether Ruto's government can finally swallow the bitter medicine it has so far avoided or whether the begging bowl will once again return empty.