Kenya will next week hold key discussions with the International Monetary Fund (IMF) as both parties seek common ground on the country’s debt management approach under a forthcoming financial programme.
Treasury Cabinet Secretary John Mbadi confirmed in an interview with Reuters on Tuesday, November 4, that the meetings will focus primarily on how securitised debt should be treated. He expressed optimism that the two sides would reach an understanding that balances fiscal responsibility with Kenya’s development priorities.
The talks come at a time when Kenya is exploring alternative financing models to fund infrastructure projects without further straining public debt levels. One of these approaches involves securitising future revenue streams a move aimed at unlocking capital by leveraging projected income such as taxes, royalties, or other government earnings.
While the government views securitisation as an innovative way to raise funds without piling on additional debt, the IMF maintains that such borrowings should still be categorised as conventional debt obligations. This difference in interpretation is expected to take centre stage during the negotiations.
Securitisation involves creating a Special Purpose Vehicle (SPV) a legally separate entity that takes control of specific future revenues. The SPV then issues asset-backed securities to investors, using those anticipated revenues as collateral. The funds raised provide the government with immediate financing, while future income from the designated sources goes toward repaying investors.
Supporters of this model argue that it offers a practical solution for governments facing tight fiscal conditions, as it provides quick access to funding, enhances cash flow, and potentially reduces pressure on public borrowing.
However, critics caution that securitisation carries long-term risks, including loss of future revenue streams, reduced budget flexibility, and possible opacity in debt reporting. They warn that without clear safeguards and transparency, the mechanism could complicate Kenya’s already delicate debt position.
As the IMF talks approach, Kenya faces the challenge of striking a balance between innovation and prudence seeking to finance its ambitious development goals while maintaining credibility in its debt management framework.
