Kenya and IMF Initiate Talks for New Lending Program Amid Economic Struggles
Kenya and the IMF have agreed to begin talks on a new lending program, abandoning the ninth review of the current $3.6 billion loan. This decision reflects Kenya’s needs for financial support as debt servicing costs rise, driven by a decade of borrowing. The existing $3.6 billion program commenced in April 2021 and is set to expire next month, hampered by protests and disputes.
Kenya and the International Monetary Fund (IMF) have agreed to initiate formal discussions regarding a new lending program, deciding against the ninth review of the existing $3.6 billion loan agreement. This decision comes as Kenya seeks ongoing financial support to stabilize its economy amidst escalating debt-servicing costs from extensive borrowing over the past decade.
Haimanot Teferra, the IMF’s mission chief, confirmed the understanding that the ninth review under the Extended Fund Facility and Extended Credit Facility programs will not go ahead. She further stated that the IMF has received a formal request for a new program from the Kenyan government.
The current loan program commenced in April 2021 and is set to expire next month. Its effectiveness has been hindered by significant challenges, including violent protests against tax hikes and disputes over new borrowing arrangements with the United Arab Emirates.
Finance Minister John Mbadi indicated last month that the Kenyan government is actively seeking a new financing program. So far, approximately $3.12 billion has been approved for disbursement under the current lending framework, according to the IMF.
In light of increasing expenditures and substantial debt servicing, the Kenyan government is engaged in efforts to secure new financing sources, which includes enhancing revenue collection. Data from the finance ministry indicates that Kenya’s total debt-to-GDP ratio was recorded at 65.7% as of June last year, exceeding the sustainable threshold of 55%.
In summary, Kenya is set to engage in negotiations with the IMF for a new lending program, moving away from the review of the existing loan agreement. Amidst significant economic challenges, including high debt servicing costs and the impacts of prior protests and borrowing disputes, the government is exploring new financing strategies. Addressing the debt-to-GDP ratio exceeding the sustainable threshold remains a critical focal point for Kenya’s economic stability.
Original Source: www.straitstimes.com
