The International Monetary Fund has asked the government of Kenya to treat Ksh335 billion raised through future tax pledges as part of the country’s official public debt.
This puts pressure on President William Ruto and his administration, as it directly affects how the country reports its borrowing.
For some time, the government has been using a method where it promises future tax income to secure funding for major infrastructure projects.
This includes roads, railways, airports, and stadiums. The funds were not listed as part of the national debt, even though the country is expected to repay them using future tax collections.
The IMF now says this approach must change, stating clearly that such funds should be recorded as debt under international standards.
The issue touches on several key projects. The planned Talanta Stadium is being funded through the sports levy. The Mau-Rironi highway project relies on fuel tax collections.
The extension of the Standard Gauge Railway from Naivasha to Malaba is tied to import duty revenues. Upgrades at Jomo Kenyatta International Airport are linked to passenger taxes.
According to the IMF, all these arrangements involve financial obligations that should be reflected in the country’s debt records.
The IMF has given the government two ways to handle this. It can either treat the funds as loans to special financing units or as direct borrowing by the government.
In both cases, the outcome is the same: the money must be counted as public debt. This removes the option of keeping such borrowing outside official records.
Treasury Cabinet Secretary John Mbadi has previously argued that these arrangements are separate from government borrowing.
However, the IMF has rejected that view, increasing pressure on the Treasury to adjust its reporting.
This matter was also discussed during recent meetings in Washington, D.C., where Kenyan officials, including Central Bank Governor Kamau Thugge, met IMF Managing Director Kristalina Georgieva.
The IMF is insisting on greater transparency.
If the reclassification goes through, Kenya’s official debt level will rise, which could affect borrowing limits and future funding options. It also adds pressure on a government already dealing with economic challenges and public concern over taxation.
