Kenya and the IMF have decided to start formal talks on a new lending programme, abandoning the ninth review of the existing $3.6 billion loan. Continuing support is crucial for Kenya’s economy due to rising debt-servicing costs. The current programme, initiated in April 2021, is set to expire soon amidst financial challenges faced by the government.
Kenya and the International Monetary Fund (IMF) have agreed to enter into formal discussions for a new lending programme, marking the decision to abandon the ninth review of their existing $3.6 billion loan. The Kenyan government emphasizes the necessity of ongoing financial assistance to stabilize the economy, particularly following spikes in debt-servicing costs stemming from extensive borrowing in recent years.
Haimanot Teferra, the IMF’s mission chief, announced, “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.” She further confirmed that the Kenyan government has formally requested a new programme.
Initiated in April 2021, the current programme is scheduled to expire next month, but its implementation has faced challenges, including anti-tax protests and disputes regarding new financing from the United Arab Emirates. Finance Minister John Mbadi previously indicated the government’s intent to pursue a new financing programme.
As of last October, a total of $3.12 billion was approved for disbursement under the ongoing lending programme. The Kenyan government is actively seeking alternative financing sources while endeavoring to enhance revenue collection, in light of escalating expenditure demands and substantial debt servicing obligations. According to the finance ministry, the country’s debt-to-GDP ratio reached 65.7% as of June last year, significantly exceeding the sustainable threshold of 55%.
In conclusion, Kenya is poised to enter negotiations with the IMF for a new lending programme, replacing the stalled ninth review of its current loan. The necessity for this new funding arises from heightened debt servicing costs and economic pressures. The Kenyan government is actively seeking solutions to manage its financial obligations, reflecting ongoing challenges in maintaining fiscal sustainability.
Original Source: www.straitstimes.com
