Kenya and the IMF will discuss a new lending programme as they abandon the ninth review of the existing $3.6 billion loan. Rising debt-servicing costs have necessitated continued financial support. The current programme, initiated in April 2021, faces challenges, leading to a formal request from Kenya for a new arrangement.
Kenya and the International Monetary Fund (IMF) have reached an agreement to initiate discussions regarding a new lending programme. This decision results in the cancellation of the ninth review of the existing $3.6 billion loan, emphasizing Kenya’s growing financial needs. Rising debt-servicing costs have prompted the need for ongoing support to stabilize the nation’s economy, following a decade of increased borrowing.
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,” outlining the shift in strategy between the two parties. As it stands, the Kenyan government has formally requested a new programme.
The current lending programme, which began in April 2021, is set to expire next month. However, its execution has faced challenges due to significant social unrest arising from anti-tax hike protests and disagreements related to borrowing from the UAE. Treasury Cabinet Secretary John Mbadi indicated the government’s intent to pursue a financing programme to address the urgent financial situation.
As of late October, the IMF had approved disbursements totaling $3.12 billion. The Kenyan government aims to identify new financing avenues and enhance revenue collection amidst rising expenditure demands and soaring debt servicing costs. The nation’s debt-to-GDP ratio reached 65.7% as of June last year—a level that surpasses the sustainable threshold of 55%.
In summary, the cancellation of the ninth review of Kenya’s current loan agreement with the IMF highlights the urgent financial challenges that the nation faces. The initiation of formal talks for a new lending programme signifies Kenya’s ongoing need for external support amidst its rising debt and economic pressures. This situation necessitates thoughtful fiscal strategies to ensure sustainable economic stability going forward.
Original Source: ntvkenya.co.ke
