World Bank and IMF loans shape policy-making in Africa

Kenyan President William Ruto stated that the loan conditions of the World Bank and IMF impose reforms on African countries beyond the purpose of the debt. Experts discuss the impact of policy conditions accompanying low-cost loans on national sovereignty and social spending.

Multilateral lending institutions the World Bank and the International Monetary Fund (IMF) have for decades provided developing countries with cheaper financing compared to commercial borrowing, especially through concessional lending windows. However, this financing often comes with reform commitments such as governments strengthening public financial management, improving tax collection, increasing transparency, and taking measures to stabilize their economies.

Supporters argue that these measures help ensure the effective use of borrowed funds, reduce corruption risks, and protect countries from deeper debt problems. Critics say that these conditions can increase the influence of international lenders over domestic policy decisions, especially in countries with limited affordable financing options.

Ruto's criticism

Kenyan President William Ruto criticized the extensive demands that African countries sometimes face when seeking external financing. Speaking at a dinner for members of the African Trade and Investment Development Insurance (ATIDI) in June, Ruto said, “It is difficult to go borrowing from people. They subject you to all sorts of things. Do this, go pass that law, what about sexual laws, do that, do this. Things that have nothing to do with the money you are looking for.”

Ruto's remarks reignited debates triggered by Kenya's recent $750 million financing package from the World Bank. The package combines traditional World Bank loans with concessional funds and requires reforms in governance, public finance, climate resilience, and social protection. According to the World Bank, this financing aims to support fiscal sustainability and resilient growth.

Negotiating space narrows

Churchill Ogutu, research director at Capital A Investment Bank, said that as fiscal space narrows, governments' bargaining power decreases. Ogutu said, “As financing options improve, conditions become less strict.” He noted that Kenya's turn towards alternative financing sources, including international bond markets, reflects a desire to reduce dependence on conditional loans.

The social cost of reforms

Across Africa, reforms tied to international financing often include politically sensitive measures such as tax increases, subsidy cuts, and spending controls. While lenders argue that such measures are necessary to achieve fiscal stability and reduce debt risks, critics say they can raise the cost of living and put pressure on households already struggling with economic hardship. In Kenya, dozens of people lost their lives during the 2024 tax reform protests.

Wangari Kebuchi, managing director of Expertise Global, said that as budgets tighten, the first cuts are usually made to social sector budgets, and children, who make up the largest segment of the population, bear the brunt of this through weakened health, education, and protection systems.

Historical debate

Nigeria removed its long-standing fuel subsidy in 2023 and introduced foreign exchange reforms, during which the depreciation of the naira increased transportation and import costs. Ghana, following its 2022 debt default, implemented measures such as public sector hiring restrictions, wage controls, and spending cuts. Critics have long argued that the Structural Adjustment Programs of the 1980s and 1990s weakened public services.

Defense and contradictions

Eric Musau, research director at Standard Investment Bank, said that concessional financing offers countries cheaper borrowing options and reduces dependence on expensive commercial debt. Musau said, “By extending repayment periods and subsidizing interest rates, these facilities lower the immediate cost of public debt.” Noting that such loans are important for countries with low credit ratings like Kenya, Musau said that concessional loans should actually benefit ordinary citizens, and the concessional element aims to protect the most vulnerable segments.

But Kebuchi highlighted the contradiction: “There is a bitter irony: citizens are asked to pay more taxes to finance health, education, water, and social protection, and then they are expected to pay out-of-pocket for the same services because tax revenues never reach the targets.”

As debates continue, Kenya and other African countries are trying to strike a balance between financial support and national priorities. For many citizens, the issue is less about the technical conditions of borrowing and more about what these choices mean in everyday life.