Kenya’s finance minister confirmed ongoing talks with the IMF for a new lending program amid rising debt costs and fiscal pressures. Despite securing substantial financial commitments, the country faces significant challenges from reduced foreign aid. Public opposition to further borrowing is growing, prompting calls for transparency in government policies.
Kenya is currently engaged in discussions with the International Monetary Fund (IMF) for a new lending program that is set to replace the existing arrangement that will expire in April. Finance Minister John Mbadi has confirmed these talks amid rising debt-servicing costs and ongoing fiscal pressures, exacerbated by declining foreign aid.
In January 2024, Kenya secured a $941 million loan boost from the IMF, raising the total commitments under the Extended Fund Facility and Extended Credit Facility to over $4.4 billion. Despite this support and the repayment of a $2 billion Eurobond in June 2024, financial challenges remain. Furthermore, the World Bank has committed $12 billion in funding for the country from 2024 to 2026.
Minister Mbadi indicated the need for indicators regarding the potential new program before the current one concludes. He mentioned considerations for a $1.5 billion commercial loan from the United Arab Emirates and the possibility of issuing another Eurobond to address funding gaps. Additionally, the U.S. administration’s freeze on foreign aid, particularly USAID funding, is putting further strain on Kenya’s budget.
Economist Amboko H. Julians anticipates that Kenya’s forthcoming IMF program would prioritize policy modifications rather than straightforward loans. He speculates it would be a Policy Support Instrument focused on economic reforms over a five-year period, emphasizing the importance of state-owned enterprise reforms and domestic revenue mobilization measures in enhancing investor confidence.
Public sentiment in Kenya is increasingly critical of government borrowing, following last year’s protests against tax increases. Despite public discontent, President William Ruto’s administration persists with expensive development projects; recent investments include a $24 million sewerage and water system and a $14 million market development initiative in Mandera County. Minister Mbadi has called for greater transparency and communication with the public regarding the government’s economic policies.
Kenya’s engagement with the IMF for a new lending program comes as the country faces significant financial pressures from rising debt-servicing costs and decreased foreign aid. Minister John Mbadi has articulated plans for the future, including potential loans and increased transparency. Challenges remain in balancing fiscal responsibility with public expectations and the pressures of foreign assistance, especially from the U.S.
Original Source: www.okayafrica.com
