Kenya and the IMF will start formal discussions on a new lending program, abandoning the ninth review of the existing $3.6 billion loan. This decision is driven by the need for continued economic support due to high debt servicing costs. The current program is set to expire next month, and Kenya’s total debt-to-GDP ratio is notably above the sustainable threshold.
Kenya and the International Monetary Fund (IMF) have agreed to initiate discussions regarding a new lending program, opting to forgo a ninth review of the existing $3.6 billion loan. This decision underscores Kenya’s need for ongoing support to stabilize its economy amidst increasing debt-servicing costs stemming from extensive borrowing over the past decade.
Haimanot Teferra, the IMF’s mission chief, confirmed that both parties understand the ninth review of the current Extended Fund Facility and Extended Credit Facility will not continue. She mentioned that the Kenyan government has formally requested a new program from the IMF.
The current loan program, which commenced in April 2021, is set to expire next month. Its execution has faced significant challenges, including widespread protests against tax hikes last year and disputes concerning new borrowing from the UAE.
Finance Minister John Mbadi stated last month that the Kenyan government is seeking a new financing program to address these fiscal challenges. As of October, the IMF had approved $3.12 billion for disbursement under the current program.
To manage its rising expenditures and substantial debt servicing costs, Kenya’s government is actively pursuing new financing sources and enhancing revenue collection. As reported by the finance ministry, Kenya’s total debt-to-GDP ratio reached 65.7% as of June last year, exceeding the sustainable threshold of 55%.
In summary, Kenya’s agreement with the IMF to explore a new lending program comes as the country grapples with rising debt and economic pressure. The decision to abandon the current loan review reflects both a response to immediate financial needs and challenges faced in implementing past agreements. Efforts to secure new financing sources and improve revenue will be critical as Kenya seeks stability in its economic future.
Original Source: www.straitstimes.com
