Kenya expects to receive a sizeable loan disbursement from the International Monetary Fund (IMF) by the end of the year following ongoing talks with the multilateral lender to combine the delayed seventh and eighth reviews of its cash support programme for Nairobi.

The twin disbursements could see Kenya receive the bulk of KSh126 billion ($976 million) in total remaining access from the programme which lapses in April next year.

“We have been having discussions with the IMF and the discussions are now looking at combining the 7th and 8th reviews. We have made a lot of progress and are in the final stages of the agreement,” Central Bank of Kenya Governor Kamau Thugge told a media briefing on Wednesday.

Kenya and the IMF reached a staff-level agreement on the seventh review of its $3.6 billion (KSh464.59billion) programme in early June.

But the review is yet to be approved by the Fund's executive board after President William Ruto was forced to scrap proposed tax increases and introduce spending cuts in late June in response to mass protests that turned deadly.

The rejected Finance Bill 2024 had targeted to significantly raise tax revenues to the State -- a key conditionality for support from the IMF.

Kenyan authorities and the IMF have subsequently had to model a new fiscal arrangement that would help improve revenue mobilisation and slow down public debt growth even as follow-up discussions delayed cash disbursements to Kenya.

Initiated in April 2021

Dr Thugge said that Kenya and the IMF have now firmed up on a new fiscal framework that limits the fiscal deficit to more than 4.3 percent of GDP unlocking the funding freeze where disbursements are expected to firm up the country’s official reserves.

“The fiscal framework has been agreed with the fiscal deficit at 4.3 per cent of GDP and so in our projections of a $1.9 billion (KSh245.4 billion) accumulation in reserves, we have assumed a disbursement from the IMF before the end of December 2024,” the CBK boss said.

The government was forced to turn to its first 2024/25 supplementary budget on the shelved Finance Bill 2024 which the government cut overall spending for the new fiscal year to KSh3.88 trillion from KSh3.99 trillion previously.

The cut to the 2024/25 budget was due to the State only expected Sh3.06 trillion in total revenue, down from Ksh3.34 trillion.

The IMF had been expected to complete the seventh review of its multi-year programme with Kenya at the end of July and initiate an eighth review of the funding framework in October.

The final review of the programme initiated in April 2021 is meanwhile set to commence in March 2024 ahead of the expiry of both the extended credit and extended fund facilities (ECF/EFF) and the resilience and sustainability fund (RSF).

In January, the IMF disbursed KSh88.4 billion ($684.7 million) covering the sixth review of the ECF/EFF programme and the first review of the RSF program.

This brought cumulative disbursements under the ECF/EFF arrangements to Ksh335.8 billion ($2.6 billion).

The IMF has been a key source of concessional/cheap funding to Kenya in recent years in the absence of costlier commercial loans amid inhibitive interest rates in the international capital markets.