Kenya has requested a new funding program from the IMF after opting not to finalize a review of an existing facility which would have provided Ksh 103.4 billion. The current $3.6 billion program concludes on April 1, raising concerns over a potential budget gap. Fiscal experts are scrutinizing this decision, particularly due to unmet benchmarks under previous agreements and public protests over tax increases.
The Government of Kenya has approached the International Monetary Fund (IMF) for a new funding program following its decision not to conduct a final review of an existing facility. This prior agreement would have released approximately Ksh 103.4 billion (around $800 million). This request comes as the existing $3.6 billion (Ksh 466.2 billion) program, initiated to address economic challenges post-COVID-19, is set to conclude on April 1.
The anticipated expiration of this funding without a subsequent disbursement raises concerns regarding a potential budget-financing gap should the IMF not approve the new financial request in a timely manner. A statement from the IMF indicated that “the ninth review under the current extended fund facility and extended credit facility programs will not proceed.” The IMF further confirmed receipt of the Kenyan government’s formal request for a new program and intends to engage in discussions moving forward.
Fiscal experts are closely monitoring Kenya’s renewed engagement with the IMF, particularly due to the nation’s failure to meet crucial benchmarks under the current program. These unmet benchmarks include reducing the fiscal deficit and enhancing revenue-generating measures. Previous attempts by the Kenyan government to introduce new taxes and broaden the tax base resulted in violent protests from citizens last year.
Additionally, the Kenyan government has undertaken financial maneuvers such as repurchasing some Eurobonds and issuing longer-dated securities. It plans to allocate about $950 million (Ksh 466.2 billion) from these actions to retire high-cost loans owed to the Trade and Development Bank. Moreover, the full disbursement of a $1.5 billion (Ksh 194.25 billion) loan from the United Arab Emirates is anticipated, although concerns from Treasury Cabinet Secretary John Mbadi regarding foreign-exchange risks and the loan exceeding Kenya’s commercial-borrowing limits may lead to changes in its disbursement schedule.
In summary, Kenya’s government has opted not to finalize a previous IMF review and is now seeking a new funding program to address looming budgetary gaps. This shift raises significant concerns due to past benchmarks being missed and notable public unrest over fiscal policies. Close monitoring by fiscal experts is warranted as the government navigates these financial challenges and responsibilities.
Original Source: www.kenyans.co.ke
