The International Monetary Fund has raised fresh concerns over Kenya’s fiscal direction, setting the stage for tense negotiations with William Ruto amid mounting pressure on the country’s public finances.
According to a report by The Standard on Saturday, the IMF is warning against the government’s decision to reduce fuel VAT to eight per cent and sustain costly subsidies aimed at lowering pump prices.
The measures, introduced to cushion households from the rising cost of living, are now at the centre of a broader dispute over fiscal discipline and debt transparency.
The lender argues that while such interventions may provide short-term relief to consumers, they risk widening Kenya’s budget deficit and undermining long-term economic stability.
IMF officials have also reportedly called for greater clarity on what they describe as “hidden debts,” adding another layer of scrutiny to the country’s financial management.
Kenya’s public debt is now estimated at about Sh12.8 trillion, underscoring the scale of the challenge facing the Treasury.
At the same time, the government is said to be spending billions of shillings to maintain fuel subsidies, a move critics warn could strain already limited fiscal space.
President Ruto’s administration, however, has defended the interventions as necessary to shield vulnerable households and businesses from high energy costs.
The government maintains that stabilising fuel prices is critical to controlling inflation and supporting economic recovery.
The unfolding standoff highlights a delicate balancing act between meeting IMF conditions and addressing domestic economic pressures.
With high-stakes talks expected, the outcome could shape Kenya’s fiscal policy trajectory in the months ahead, particularly on taxation, subsidies, and debt management.