Kenya and the IMF are preparing for formal negotiations on a new lending program, foregoing the current $3.6 billion loan’s ninth review, in light of increasing debt service costs and economic challenges. The existing loan program, initiated in April 2021, is set to expire next month, prompting the need for fresh financial strategies.
Kenya has engaged in discussions with the International Monetary Fund (IMF) to initiate a new lending program, forgoing the ninth review of an existing $3.6 billion loan. This decision was influenced by Kenya’s pressing need for continued financial support to manage surging debt-servicing costs resulting from substantial borrowing over the last decade.
According to Haimanot Teferra, the IMF mission chief, both the Kenyan authorities and the IMF staff have agreed not to proceed with the ninth review under the current Extended Fund Facility and Extended Credit Facility programs. The Kenyan government has formally requested a new lending program in light of the current agreement.
The existing lending program commenced in April 2021 and is set to expire next month. Its execution has faced challenges due to significant anti-tax hike protests in the previous year and other disputes, including a disagreement about new borrowing from the UAE.
Nairobi has seen Treasury Cabinet Secretary John Mbadi indicate that the government is actively seeking a new financing program. By the end of October, approximately $3.12 billion from this program had already been approved for disbursement, as reported by the IMF.
In the face of substantial spending demands and high debt-servicing costs, Kenya’s government continues to pursue alternative funding sources and enhance revenue collections. As of June last year, the country’s debt-to-GDP ratio was recorded at 65.7%, greatly surpassing the 55% threshold viewed as sustainable.
Amid economic pressure, these negotiations with the IMF underscore Kenya’s attempt to stabilize its financial position while addressing the challenges arising from its increased debt burden.
The discussions between Kenya and the IMF mark a pivotal step towards securing necessary financial assistance amid rising debt challenges. As Kenya shifts focus from the current loan review to a new lending program, addressing the country’s economic pressures remains paramount. With its debt levels significantly exceeding sustainable thresholds, Kenya must effectively manage its borrowing strategy while enhancing revenue collection to stabilize its economy.
Original Source: ntvkenya.co.ke
