Balancing the national budget remains an unattainable goal, says Mbadi

The government has decided to forgo the 9th review of the International Monetary Fund (IMF) program, which is set to expire on April 1, 2025, says Treasury CS John Mbadi.

CS Mbadi explained that the remaining time before the program ends is insufficient to complete the review process, adding that the government has now opted to negotiate a new agreement with the IMF instead.

The development comes just a day after Central Bank of Kenya (CBK) Governor Kamau Thugge urged the National Treasury to rein in the government’s borrowing habits to free up credit for the private sector at more affordable rates.

According to Treasury officials, access to external financing is becoming increasingly constrained as global lenders remain cautious due to policy shifts such as the one by the Trump administration in the U.S, where the superpower has frozen foreign funding initiatives.

This means many countries that highly depend on external funding including Kenya will struggle to secure foreign funding amid economic turmoil, a fact that CS Mbadi admits.

"We have to accept the situation as it is. If we had access to external funding, we could have a discussion, but we simply don’t," said the CS.

"The recent policy direction in the U.S. will not only affect American loans and support but will also have ripple effects on funding from Europe."

The Treasury further warns that under the current fiscal conditions, balancing the national budget remains an unattainable goal.

CS Mbadi outlined the government's medium-term debt strategy, emphasizing plans to lower borrowing costs and mitigate financial risks.

He explained that the Treasury aims to source 25% of gross borrowing from external lenders while relying on domestic sources for the remaining 75%.

"We cannot completely stop borrowing; that would be unrealistic. Right now, balancing the budget is not feasible. If we were to do so immediately, essential public services would suffer, and citizens would be unwilling to pay taxes without receiving the corresponding benefits," Mbadi stated.