Kenya is negotiating fresh financing with the World Bank and African Development Bank (AfDB) to support its budget, with new external funds expected before the end of the financial year in June 2027, Central Bank of Kenya Governor Kamau Thugge said on October 16.
The government is exploring several sources of multilateral financing, including a potential World Bank Development Policy Operation (DPO), Thugge told Reuters on the sidelines of the International Monetary Fund (IMF) and World Bank annual meetings in Bangkok. No new financing agreement or disbursement was announced.
The World Bank approved a $750mn DPO for Kenya in June, while the AfDB approved a €293.9mn ($335mn) reform-linked loan in July.
The talks come as Kenya seeks to manage heavy debt repayments and limit its reliance on domestic borrowing. Its approved 2026/27 budget provides for a fiscal deficit equivalent to 5.5% of GDP and targets KES247.2bn ($1.9bn) in net external financing. That figure represents planned borrowing rather than funding already secured.
Thugge said a debt-for-food swap was another option under consideration, although he provided no details of the negotiations. Kenya has previously proposed refinancing expensive debt through such an arrangement, with the resulting savings directed towards food-security programmes. No completed transaction was announced.
President William Ruto announced a proposed $1bn debt-for-food swap with the US International Development Finance Corporation (DFC) in December 2025. The Public Debt Management Office said on October 5 that no bank had yet been mandated to arrange the transaction, which the Treasury aims to complete by the end of March 2027.
Separately, Kenya expects to make approximately KES51.9bn ($400mn) available for emergency use through the World Bank's Rapid Response Option, which allows countries to redirect portions of existing undisbursed project financing towards eligible crises.
The mechanism could help address risks from high energy prices, disease outbreaks and El Niño-related weather disruptions. Unlike the proposed budget-support loans, it would involve reallocating previously committed World Bank funds rather than obtaining fresh financing.
Kenya is also due to hold talks with the IMF when a Fund mission visits Nairobi in December for a regular Article IV consultation.
Thugge said a new IMF lending programme was not included in the government's current financing plans, although it could be discussed during the visit.
“The IMF funding is not in any of our planning,” he told Reuters.
He said concessional IMF financing would be cheaper than alternative sources, particularly domestic borrowing, and could ease government demand for local credit, potentially allowing banks to lend more to private businesses.
Kenya's previous IMF financing arrangement expired in 2025, and discussions about a successor programme have yet to produce a new agreement. The $3.6bn arrangement ended in April 2025 without completion of its ninth and final review.
Thugge warned that inflation risks were tilted upwards because of higher fuel prices linked to the Middle East conflict. He said rising bond yields in developed economies could add pressure by weakening the Kenyan shilling and increasing import costs.
Kenya's energy regulator increased maximum petrol and diesel prices earlier in October, reflecting higher import costs. Thugge said declining food prices could partly offset the inflationary impact, leaving the central bank time to assess developments before its next monetary policy decision.
The Central Bank of Kenya held its benchmark interest rate at 8.75% on October 7, the fourth consecutive meeting without a change.
Thugge forecast economic growth of 5% in 2026 and 5.3% in 2027, above the IMF's respective projections of 4.5% and 4.7%, citing expected strength in agriculture, industry and services.
See IntelliNews: World Bank approves $750mn loan to Kenya to support fiscal reforms
See IntelliNews: Kenya says no bank mandated yet for $1bn debt-for-food swap
See IntelliNews: Kenya holds benchmark rate at 8.75% as inflation nears top of target range