A shadow of economic hardship and potential unrest hangs over Kenya as confirmation of fresh loan talks with the International Monetary Fund (IMF) signals the likely return of deeply unpopular austerity measures—policies previously dubbed the “bitter pill” that ignited deadly youth protests just last year.
The Governor of the Central Bank of Kenya (CBK), Dr Kamau Thugge, confirmed the negotiations on Thursday, stating: “We are indeed having discussions with the IMF, and the government did send a letter to the IMF requesting to negotiate a new arrangement.”
An IMF delegation is expected in Nairobi in September to begin formal talks under an Article IV consultation—the precursor to a potential new funding programme.
This development comes barely two months after President William Ruto’s Kenya Kwanza administration abruptly terminated its existing $2.3 billion (approximately Sh301 billion at the time) IMF programme.
That programme—comprising an Extended Fund Facility (EFF) and Extended Credit Facility (ECF)—was scrapped after Kenya failed to meet key targets, resulting in the loss of Sh110 billion in anticipated funding.
The spectre of the previous IMF-backed measures still looms large. Fiscal consolidation demands tied to the now-defunct programme directly fuelled the “Generation Z” protests in June 2024.
Outraged by proposed tax hikes they viewed as punitive, thousands of young Kenyans took to the streets amid a rising cost of living. Key triggers included a proposed 16% VAT on bread, increased taxes on mobile money transfers, and new levies on other essential goods.
Human rights groups reported dozens of deaths during a government crackdown on the protests—casting a long shadow over Kenya’s relationship with the IMF and underlining the immense social cost of austerity measures perceived as indifferent to public suffering.
The IMF has acknowledged the programme’s termination and Kenya’s request for a new arrangement, confirming that the ninth review “will not proceed.”
Both the IMF and the Ruto administration now face the hard-learned lesson from last year’s unrest: the need for effective communication, genuine public engagement, and sensitivity to the social acceptability of reforms.
An IMF paper published in 2024, Understanding the Social Acceptability of Structural Reforms, emphasised the importance of “strong institutional frameworks that foster trust and a two-way dialogue.”
As Kenya navigates this difficult path, it is also pushing its largest bilateral creditor, China, to conclude a crucial financial cooperation agreement by the end of June. Foreign Affairs Cabinet Secretary Musalia Mudavadi urged his Chinese counterpart Wang Yi to expedite talks during a meeting in Changsha, citing momentum from President Ruto’s recent visit.
With September approaching, anxiety is mounting. The expected IMF conditions—likely to include deep cuts in public spending and potential implications for public sector employment—could worsen Kenya’s unemployment crisis.
The government now faces the formidable task of securing critical funding while avoiding a repeat of the social upheaval triggered by the last “bitter pill.” The outcome will profoundly shape Kenya’s economic and political trajectory in the months ahead.
– By Nusurah Nuhu
