Kenya and the IMF are set to commence formal talks on a new lending program, abandoning the ninth review of the current $3.6 billion loan. The talks are driven by Kenya’s need for financial support amid soaring debt servicing costs and escalating expenditures. The current program, established in April 2021, is nearing expiration, and the government aims to secure additional financing avenues.
Kenya and the International Monetary Fund (IMF) have initiated discussions for a new lending program, opting to forgo the ninth review of the existing $3.6 billion loan. The move comes as Kenya seeks ongoing assistance to stabilize its economy amid rising debt servicing costs due to extensive borrowing over the past decade. Haimanot Teferra, IMF’s mission chief, confirmed this agreement at the conclusion of her visit to Nairobi, noting that a formal request for a new program has been received from the Kenyan government.
The current lending program, which began in April 2021, is slated to expire next month. Its effectiveness has been compromised by violent protests over tax increases and disputes regarding borrowing from the United Arab Emirates. Treasury Cabinet Secretary John Mbadi conveyed last month that the government is actively pursuing a financing program to address these challenges.
As of last October, the IMF has approved $3.12 billion for disbursement under the current program. In light of escalating expenditures and high debt servicing costs, the Kenyan government is endeavoring to explore alternative financing sources, including enhancing revenue collection. Recent figures indicate that Kenya’s total debt-to-GDP ratio was 65.7% as of June of last year, exceeding the sustainable threshold of 55%.
In conclusion, Kenya and the IMF’s agreement to enter formal discussions for a new lending program marks a significant step towards stabilizing the nation’s economy. With a government struggling to manage high debt servicing costs and increased expenditures, the transition from the existing loan program, which faced implementation hurdles, highlights the urgency for effective financial solutions. The pursuit of alternative financing avenues will be critical as Kenya navigates its fiscal challenges.
Original Source: ntvkenya.co.ke
