Kenya is set to initiate formal discussions with the IMF for a new lending program, discontinuing the previous $3.6 billion loan review due to soaring debt servicing costs. The current loan program is aimed at stabilizing the economy, which faces operational challenges amid rising debt-to-GDP ratio.
Kenya and the International Monetary Fund (IMF) have agreed to commence formal negotiations for a new lending program, opting to discontinue the ninth review of the existing $3.6 billion loan. The decision comes as Kenya seeks ongoing support to stabilize its economy amid increased debt servicing costs resulting from extensive borrowing over the past decade.
Haimanot Teferra, the IMF mission chief, expressed in a statement that the Kenyan authorities and the IMF staff have reached a mutual understanding that the ninth program review will not be pursued anymore. The Kenyan government has officially submitted a request for a new financing program to the IMF, emphasizing their need for support.
The current lending program initiated in April 2021 is set to conclude next month, but has faced challenges including protests against tax increases and tensions surrounding new borrowing from the UAE. Under this program, more than $3.12 billion was approved for disbursement by the end of October.
To manage escalating expenditure and debt servicing demands, the Kenyan government is actively exploring additional financing options to enhance revenue collection. As of June of the previous year, Kenya’s total debt-to-GDP ratio stood at an alarming 65.7%, exceeding the sustainable threshold of 55%.
In summary, Kenya and the IMF’s decision to negotiate a new lending program highlights the country’s ongoing struggle with rising debt servicing costs and the necessity for international support. With the current program nearing expiration and various operational challenges faced, effective revenue enhancement measures will be crucial in managing Kenya’s financial stability.
Original Source: ntvkenya.co.ke
