Kenya and the IMF have agreed to begin discussions on a new lending program, abandoning the current $3.6 billion loan review. The country faces rising debt servicing costs and is seeking new financial support to address economic challenges. The IMF confirmed receiving a formal request for a new program from Kenyan authorities, with existing arrangements being hindered by protests and disputes.
Kenya and the International Monetary Fund (IMF) have decided to engage in formal discussions regarding a new lending program, forgoing the ninth review of the existing $3.6 billion loan. The Kenyan government requires ongoing support to stabilize its economy amidst rising debt servicing costs stemming from a significant borrowing surge over the past decade.
Haimanot Teferra, the IMF’s mission chief, stated, “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.” In light of this decision, the Kenyan government has submitted a formal request for a new program.
The current loan program commenced in April 2021 and is set to expire next month. Its execution has been disrupted due to serious anti-tax hike protests last year and disputes concerning new borrowing from the United Arab Emirates.
Finance Minister John Mbadi indicated last month that the government is actively pursuing a financing program. By the end of October, the IMF had approved $3.12 billion for disbursement under the current program. Additionally, Kenya’s government is striving to identify new sources of financing by enhancing revenue collection to meet escalating expenditure demands and substantial debt servicing obligations.
According to finance ministry data, Kenya’s debt-to-GDP ratio stood at 65.7% as of June of the previous year, significantly exceeding the 55% considered sustainable. This alarming statistic highlights the urgent need for effective financial management and support from international partners.
In summary, Kenya and the IMF will initiate discussions for a new lending program, moving away from the ninth review of the existing loan agreement. The decision arises from Kenya’s urgent need to manage rising debt servicing costs and secure new financing avenues, as current debt levels surpass sustainable thresholds. The government’s proactive approach to negotiating additional support is crucial for stabilizing the economy.
Original Source: www.straitstimes.com
