The IMF and Kenya have agreed not to complete the ninth review of their Extended Credit Facility program, putting key external funding in jeopardy. The move raises concerns among lenders, as it signals Kenya may have missed some reform targets. Still, the country maintains strong foreign currency reserves and continues to attract investors through its bond market.

Kenya’s plans to secure two concessional loans worth a total of $2.3 billion have hit a setback, according to credit rating agency S&P Global Ratings. The loans, which were expected to be finalized before the end of the first half of 2025, are now in jeopardy due to the country failing to complete its ninth and final review with the International Monetary Fund (IMF) as part of its ongoing Extended Credit Facility (ECF) program that began in 2021.

"The Kenyan authorities and IMF staff have reached an understanding that the ninth review under the current Extended Fund Facility and Extended Credit Facility programs will not proceed. The IMF has received a formal request for a new program from the Kenyan authorities and will engage with them going forward," the IMF stated in a March 17 press release.

One of the affected loans is an $800 million loan from the World Bank. The second, $1.5 billion, was expected to be raised in the United Arab Emirates, with part of it expected to come as private debt and the rest through syndicated loans from private creditors. This comes in addition to the last disbursements from the IMF program, which amounted to nearly $850 million.

IMF programs are designed to provide countries with access to external resources, including Special Drawing Rights (SDRs), which can be converted into US dollars. These resources help countries manage payment difficulties related to external obligations. A successful program agreement also acts as a catalyst for other international lenders, who are more likely to offer financial support to countries under an IMF program.

However, to access these gradual disbursements and associated financing, countries must implement a range of reforms. For Kenya, the decision not to complete the final review signals that some program targets have not been met. For the international community of donors, such situations often raise concerns about budget discipline and can be seen as a negative indicator of the country’s ability to repay its debt.

Despite the IMF setback, Kenya still has several tools at its disposal to maintain external stability, including foreign exchange reserves estimated at nearly $10 billion. Investors remain generally optimistic about the country's foreign currency bonds, and on the domestic market, capital market-issued bonds are regularly oversubscribed.