Kenya and the IMF will commence talks on a new lending programme, moving away from the ninth review of the current $3.6 billion loan. The government seeks to address rising debt-servicing costs following a decade of borrowing. The current programme is set to expire next month and has faced implementation challenges related to protests and disputes over external borrowing.
Kenya and the International Monetary Fund (IMF) have agreed to initiate discussions regarding a new lending programme for the country, opting to forgo the ninth review of the existing $3.6 billion loan. This decision arises amidst rising debt-servicing costs for Kenya, which have escalated significantly due to extensive borrowing over the past decade.
Haimanot Teferra, the IMF’s mission chief, indicated that an understanding was reached stating, “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.” The IMF has acknowledged receiving a formal request from the Kenyan government for a new funding programme.
The current lending programme, which commenced in April 2021, is set to expire next month but has faced challenges due to violent anti-tax hike protests last year and controversy surrounding new borrowing from the United Arab Emirates. Finance Minister John Mbadi has conveyed to Reuters that the government aims to secure a financing programme moving forward.
Under the existing programme, the IMF had approved a total disbursement of $3.12 billion by the end of October. In light of increasing expenditure requirements and substantial debt servicing costs, the Kenyan government is actively seeking alternative financing sources, including enhancing revenue collection. Kenya’s debt-to-GDP ratio reached 65.7% as of June last year, surpassing the 55% threshold deemed sustainable, as reported by the finance ministry.
The discussions between Kenya and the IMF indicate a critical juncture for the East African nation as it seeks sustainable financial solutions. With the existing loan programme nearing its end, a new agreement is essential for maintaining economic stability amidst growing debt obligations. The government’s proactive approach to seeking alternative financing reflects its commitment to addressing fiscal challenges effectively.
Original Source: www.straitstimes.com
