Kenya Engages IMF for New Lending Programme Amid Rising Debt Challenges
Kenya and the IMF have agreed to start discussions on a new lending programme, abandoning the ninth review of the current $3.6 billion loan. The IMF received a formal request for a new programme from the Kenyan government, as rising debt-servicing costs necessitate continued financial support. Kenya’s total debt-to-GDP ratio is currently at 65.7%, above the sustainable threshold of 55%.
Kenya and the International Monetary Fund (IMF) have initiated discussions regarding a new lending programme, abandoning the ninth review of the existing $3.6 billion loan. This decision is critical as Kenya’s debt-servicing costs have escalated following extensive borrowing over the past ten years. Haimanot Teferra, the IMF’s mission chief, confirmed, “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.”
The Kenyan government has formally requested a new programme, with the current arrangement which began in April 2021 set to expire next month, having faced implementation challenges including protests over tax hikes and controversies surrounding new borrowing from the United Arab Emirates. According to Treasury Cabinet Secretary John Mbadi, the government is actively pursuing alternative financing solutions.
To address its growing expenditure needs and rising debt servicing costs, the Kenyan government is focusing on increasing revenue collection. As of June last year, the total debt-to-GDP ratio stood at 65.7%, significantly above the sustainable threshold of 55%, as per finance ministry data. Meanwhile, by the end of October 2022, the IMF approved the disbursement of $3.12 billion under the current lending programme.
In summary, Kenya’s discussions with the IMF to establish a new lending programme reflect the urgent need for financial assistance amid rising debt pressures. The abandonment of the ninth review underscores the challenges the current programme has faced. With an increasing debt-to-GDP ratio, the Kenyan government is working to enhance revenue collection and secure alternative financing avenues to stabilize the economy moving forward.
Original Source: ntvkenya.co.ke
