A major accounting disagreement between the Kenyan government and the International Monetary Fund (IMF) has surfaced, threatening the country’s access to vital international credit options. The dispute stems from KSh 335 billion (US$2.59 billion) raised under President William Ruto’s administration by using future tax revenues as collateral.
The IMF has put forward a counter-argument that this money must be recorded as “sovereign debt.” In a report issued after a rigorous staff mission to Nairobi, the IMF criticized the National Treasury’s strategy of using Special Purpose Vehicles (SPVs) to fund large-scale infrastructure projects.
While the government has sought to modernize the country without increasing its official debt stock by pledging future income from fuel levies, railway transport, and airport taxes as security, the IMF is now strongly urging that these obligations be included in the government’s official balance sheet.
The technical findings of the IMF identified four major projects currently utilizing this “off-balance-sheet” method: the Talanta Sports Stadium, which is supported by a KSh 44.7 billion bond backed by sports levy revenue; road construction funded by KSh 175 billion from fuel levies; the SGR railway line expansion, which plans to use 90% of the Railway Development Levy for the Naivasha-Malaba line; and the JKIA airport upgrades, supported by future passenger tax revenue.
According to international statistical standards, the IMF argues that these arrangements constitute a “debt liability.” The organization maintains that even if the entities involved are legally independent, the government remains the ultimate guarantor for these funds.
National Treasury Cabinet Secretary John Mbadi has stood firm on his position, framing the disagreement as an “accounting debate” rather than a fundamental financial crisis. He argued that once a right is sold to an SPV, there is no longer any risk to the government, asserting that transferring revenue rights protects the taxpaying public from additional risk.
However, the impact of this disagreement is already being felt; Kenya’s previous $3.6 billion agreement with the IMF expired in April 2025, and a recent mission led by Haimanot Teferra concluded without a new loan agreement. The IMF has indicated that any future program will require “strengthened fiscal discipline,” including transparent accounting for these billions held as collateral.
If the IMF’s classification is applied to Kenya, the country’s debt level—which has already reached KSh 12 trillion ($92.68 billion)—could show a significant increase. Following the domestic debt crossing the KSh 7.05 trillion threshold for the first time in February 2026, including these “hidden” debts could push the debt-to-GDP ratio above 70%. As talks continue this week at the IMF and World Bank Spring Meetings in Washington, the Ruto administration is left with narrow options. While the government is attempting to lean toward private capital, the IMF’s “stamp of approval” remains crucial for maintaining investor confidence. For now, however, the bridge between Nairobi’s “creative accounting” and Washington’s “strict regulations” has yet to be built.
