Kenya has foregone a potential Ksh103.4 billion ($800 million) IMF deal, prompting a request for a new funding program. The existing $3.6 billion program ends on April 1, potentially leading to budgetary shortfalls if the new request is not approved. Failure to meet fiscal benchmarks raises concerns among experts about Kenya’s economic reforms and public response.
The Government of Kenya has sought a new funding program from the International Monetary Fund (IMF) after opting against the final review of an existing facility. This decision would have released approximately Ksh103.4 billion ($800 million) from the current program. The existing four-year program, amounting to $3.6 billion (Ksh466.2 billion), which was initiated following the Covid-19 pandemic, will conclude on April 1, 2024.
The failure to secure a final disbursement may create a financial shortfall if the new IMF request is not approved promptly. The IMF confirmed that both parties have agreed not to advance with the ninth review of the extended fund facility and extended credit facility programs. They also acknowledged the Kenyan authorities’ formal request for a new program, promising further engagement in this matter.
Fiscal experts will be closely monitoring Kenya’s return to the IMF, especially after the country failed to meet critical benchmarks related to reducing its fiscal deficit and enhancing revenue measures. Previous attempts by the government to introduce new taxes led to significant public opposition, especially among the youth.
Recently, the government undertook measures to improve its financial position by buying back Eurobonds, issuing longer-dated securities, and announced that it would allocate approximately $950 million (Ksh466.2 billion) to retire costly syndicated loans owed to the Trade and Development Bank. Furthermore, a full disbursement of a $1.5 billion (Ksh194.25 billion) loan from the United Arab Emirates is expected, although concerns regarding foreign-exchange risks and implications on Kenya’s borrowing capabilities have emerged from Treasury CS John Mbadi.
In summary, Kenya’s decision to forgo a final IMF review in favor of a new funding program highlights the pressing need for financial support amid fiscal challenges. The country must navigate a complex landscape of economic reforms, public sentiment, and potential loan risks. Close attention is warranted regarding the success of negotiations with the IMF and the management of existing debts to ensure fiscal stability.
Original Source: www.kenyans.co.ke
