CS Mbadi Reveals the Reason Behind Delay in New Loan as Kenya Prepares for Follow-Up Talks With IMF
Kenya is expected to hold another round of follow-up talks with the International Monetary Fund (IMF) next week, with the main focus being to reach an agreement on the country’s debt management approach before launching a new financial programme.
Speaking to Reuters on Tuesday, November 4, Treasury Cabinet Secretary John Mbadi revealed that the upcoming discussions will mainly revolve around how to handle securitised debt.
He expressed optimism that Kenya and the IMF would eventually come to a mutual understanding on the matter.
The talks come at a time when Kenya’s debt levels have been steadily rising, putting pressure on the country’s overall financial stability.
In an effort to ease this burden and fund major infrastructure projects, the government has adopted new financing strategies — one of which involves securitising some of its revenue streams and borrowing against them.
According to Mbadi, while the government believes securitisation helps it avoid taking on additional debt, the IMF considers this method a form of borrowing that should still be classified as debt. This difference in perspective has become a key sticking point in the ongoing negotiations.
Securitisation is a financial practice where a government turns its future income — such as taxes, royalties, or other public revenues — into instant cash by issuing securities like bonds or notes backed by those future earnings.
This process typically involves the creation of a Special Purpose Vehicle (SPV), which acts as an independent entity to manage the future revenue streams separately from the government’s main budget.
The SPV is granted rights to collect or receive certain future revenues. It then issues asset-backed securities (ABS) to investors, using those future revenues as collateral.
Investors purchase the securities, providing the SPV — and ultimately the government — with immediate funds. Over time, the revenues that were pledged are used to repay the investors.
Supporters of securitisation praise it as a smart and innovative way for the government to raise quick capital without directly increasing the national debt. They argue it can relieve fiscal pressure, help clear pending bills, and improve how public debt is managed.
However, critics have raised concerns, warning that it could reduce future government revenue, create transparency issues around national debt, limit flexibility in public spending, and even open the door to financial mismanagement.
Earlier this year, the Kenyan government securitised part of the fuel levy to raise Ksh175 billion. The funds were used to pay contractors and restart over 580 stalled road projects.
This arrangement involved selling the rights to future Road Maintenance Levy collections to investors in exchange for immediate cash, allowing the government to pay off debts without taking new loans or increasing taxes.
In this specific case, the Kenya Roads Board (KRB) transferred to a Special Purpose Vehicle (SPV) the rights to receive a portion of the Road Maintenance Levy — Ksh7 out of the Ksh25 charged per litre of fuel.
This means KRB retained Ksh18 per litre for its operations, while the remaining Ksh7 served as the backing for the securitisation deal.
Kenya’s $3.6 billion (approximately Ksh465.1 billion) loan programme with the IMF expired earlier this year. Some government officials have shown interest in negotiating a new agreement that will include a lending component to help support the country’s financial needs.
The proposed new loan is expected to help Kenya meet its external debt repayment obligations. It follows the government’s decision to forgo the last disbursement of around $850 million (Ksh109.9 billion) from the previous programme after failing to meet certain performance benchmarks, including reducing the fiscal deficit and improving tax collection.
In September, an IMF delegation visited Kenya to begin discussions on the new financial arrangement. During their visit, the team conducted a thorough assessment of Kenya’s economic performance, financial policies, and debt sustainability before making recommendations on whether to approve a fresh loan.
This visit marked the second IMF mission to Kenya within five months. Earlier in June, another team from the global lender had visited the country to conduct a two-week review of Kenya’s anti-corruption laws and institutional frameworks — a key factor in determining future lending and investment partnerships.
The upcoming follow-up talks between Kenya and the IMF are therefore seen as crucial in shaping the country’s next phase of financial cooperation, debt restructuring, and sustainable economic recovery.
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