Kenya and the IMF are set to commence formal talks on a new lending programme, abandoning the review of the existing $3.6 billion loan. The decision arises from Kenya’s need for continued financial support amid rising debt-servicing costs. The current programme expires next month, having faced implementation challenges. Finance Minister Mbadi indicated the government’s pursuit of new financing options to tackle economic pressures.
Kenya and the International Monetary Fund (IMF) have agreed to start formal discussions regarding a new lending programme, opting to forgo the ninth review of the current $3.6 billion loan. This decision is prompted by Kenya’s urgent need for financial support to stabilize its economy amid soaring debt-servicing costs incurred over the past decade.
Haimanot Teferra, the IMF mission chief, indicated in a recent statement that both Kenyan authorities and IMF staff have reached an understanding to abandon the ninth review under the Extended Fund Facility and Extended Credit Facility programs. The Kenyan government has formally requested a new lending programme from the IMF as the current one is set to expire next month.
The existing programme, implemented in April 2021, has faced challenges due to anti-tax hike protests and contention surrounding borrowing from the United Arab Emirates. Finance Minister John Mbadi revealed last month that the government is actively pursuing a financing programme to address these challenges.
As of the end of October, the IMF had approved $3.12 billion for disbursement under the current programme. The Kenyan government is under pressure to secure new financing sources, including enhancing revenue collection, to manage its increasing expenditure and significant debt servicing obligations. Currently, Kenya’s debt-to-GDP ratio is 65.7%, substantially higher than the sustainable threshold of 55%, according to finance ministry data.
In summary, Kenya’s engagement with the IMF marks a critical step toward securing essential financial support as the nation grapples with significant economic challenges. The move to initiate discussions for a new lending programme comes as the existing arrangement faces expiration and difficulties in implementation. With a pressing need to manage its debt levels, Kenya’s approach will be pivotal in shaping its economic stability moving forward.
Original Source: www.straitstimes.com
