Kenya has opted not to finalize an IMF facility review to instead request a new funding program worth Ksh103.4 billion. The existing $3.6 billion program ends on April 1, 2024, leaving a potential budget gap. Various fiscal challenges persist, coupled with ongoing close observation from fiscal experts. Additionally, concerns over a $1.5 billion UAE loan complicate the financial planning.
The Government of Kenya has sought assistance from the International Monetary Fund (IMF) for a new funding program, having opted not to complete a final review of an existing facility that intended to release approximately Ksh103.4 billion ($800 million). This decision follows the expiration of a $3.6 billion (Ksh466.2 billion) four-year program, initially established to address the economic challenges posed by the COVID-19 pandemic and set to conclude on April 1.
The absence of a final disbursement from the previous facility raises concerns about a potential budget-financing gap for Kenya, contingent upon the timely approval of the new IMF request. Following a staff visit, the IMF confirmed, “The Kenyan authorities and IMF staff have reached an understanding that the ninth review under the current extended fund facility and extended credit facility programs will not proceed.” Moreover, they acknowledged receiving a formal request for a new program.
The situation is closely monitored by fiscal experts, particularly given Kenya’s failure to meet critical benchmarks set under the previous program, such as reducing its fiscal deficit and enhancing revenue collection. Efforts to raise new taxes and broaden the tax base in past fiscal years led to significant protests from younger generations.
Recently, the Kenyan government repurchased certain Eurobonds and issued long-term securities, planning to allocate approximately $950 million (Ksh466.2 billion) to repay costly syndicated loans owed to the Trade and Development Bank. In addition, Kenya anticipates the full disbursement of a $1.5 billion (Ksh194.25 billion) loan from the United Arab Emirates, originally intended for staggered release. However, concerns raised by Treasury Cabinet Secretary John Mbadi regarding foreign-exchange risks and exceeding commercial-borrowing limits may complicate this arrangement.
In summary, the Government of Kenya has halted the final review of an existing IMF program to seek new funding, amid fiscal challenges and unmet benchmarks. The impending expiration of the current facility heightens concerns about budgetary financing, emphasizing the urgency for a new agreement with the IMF. Experts continue to scrutinize tax policies and international loans as Kenya navigates its fiscal landscape.
Original Source: www.kenyans.co.ke
