NAIROBI, Kenya, July 6 – Kenya is among a group of developing economies experiencing shrinking fiscal space as rising debt obligations and International Monetary Fund (IMF)-backed fiscal reforms leave governments with less room to finance economic growth and essential public services, according to a new report.
The report, Still Cooking With a Failed Recipe, by ActionAid, Education International and the Tax and Education Alliance argues that despite the IMF’s growing emphasis on protecting social spending and promoting inclusive growth, its country-level policy advice continues to prioritize fiscal consolidation and debt repayment, limiting governments’ ability to invest in health, education and other productive sectors.
The findings are based on a review of 29 IMF documents covering 11 countries, including Kenya, between February 2022 and February 2025.
For Kenya, the report says efforts to restore fiscal sustainability have narrowed the government’s budget flexibility at a time when demand for public investment remains high.
Researchers argue that while IMF documents recognize the importance of protecting vulnerable groups, the fiscal projections accompanying those recommendations leave little room for expanding expenditure on essential services.
According to the report, Kenya’s external debt stood at $39.7 billion, with external debt repayments accounting for 28.7 percent of national revenue, one of the highest debt-service burdens among the African countries reviewed.
The report categorises Kenya as facing a high risk of debt distress, noting that debt servicing absorbs a substantially larger share of government revenue than spending on health.
“The IMF may have changed its language, but not its recipe: behind the rhetoric, austerity is still the default.”
“The narrative sometimes suggests that the IMF has shifted and considers social spending on health and education to be important. But the numbers and projections tell a different story.”
The report argues that constrained fiscal space is limiting governments’ ability to invest in infrastructure, healthcare, education and social protection needed to support long-term productivity and economic growth.
It adds that IMF recommendations across the countries reviewed consistently favoured spending restraint, targeted welfare programmes and public sector wage moderation regardless of individual country circumstances.
In Kenya, the researchers acknowledge that IMF programmes identify priority social interventions, including free primary and secondary education, universal health coverage, maternal healthcare, school feeding programmes and cash transfers for vulnerable households.
However, they argue that these programmes remain constrained by broader fiscal consolidation targets aimed at reducing budget deficits and maintaining debt sustainability.
The report also questions the IMF’s tax policy recommendations, saying they continue to rely heavily on indirect taxes while falling short of advocating more ambitious progressive tax reforms that could raise domestic revenue without disproportionately affecting lower-income households.
The findings come as Kenya continues implementing fiscal reforms aimed at reducing the budget deficit, strengthening revenue collection and stabilising public debt while pursuing its medium-term economic development agenda.
The IMF has consistently maintained that its policy advice is tailored to individual country circumstances and seeks to preserve macroeconomic stability while safeguarding priority social spending. It also says national authorities retain responsibility for fiscal policy decisions and the design of tax measures.
The report calls for reforms to the international financial architecture, arguing that countries such as Kenya require greater fiscal space through fairer debt restructuring mechanisms and more sustainable financing models to support long-term economic growth.
