Globally, sovereign funds manage more than $16 trillion (about Sh2 quadrillion) in assets The National Treasury building in Nairobi In a report published last week, the international lender says countries establishing such investment vehicles must build strong legal and governance frameworks to safeguard public wealth and maintain investor confidence.
The warning comes just weeks after Kenya created the legal framework for its sovereign wealth fund, designed to invest and preserve revenues from natural resources and selected state assets. This, as the country seeks alternatives to debt-financed development. The IMF notes that sovereign wealth funds have become some of the world's most powerful institutional investors, managing more than $16 trillion (about Sh2 quadrillion) in assets globally, compared with about $3 trillion (Sh388 trillion) in 2008.
According to IMF, their mandates have expanded well beyond stabilising government budgets and saving wealth for future generations to financing infrastructure, industrialisation and strategic national development. "Their ability to act nimbly, diversify public wealth, and invest for the long term have important and lasting benefits for citizens today and future generations," the IMF says.
However, the lender cautions that rapid expansion without clear legal mandates, transparent governance and accountability could undermine public trust and expose funds to political interference. As governments increasingly use sovereign wealth funds to pursue economic transformation, the IMF says their legal frameworks must clearly define investment objectives, governance structures, reporting requirements and oversight mechanisms.
For Kenya, the timing of the warning is significant. The Sovereign Wealth Fund Act establishes a framework for managing and investing proceeds from petroleum revenues, mining royalties, dividends from government investments in resource enterprises, privatisation proceeds and other approved sources.