The Kenyan government is pursuing a new IMF funding program after deciding against completing a final review of an existing deal that would have released Ksh 103.4 billion. The current four-year program ends soon, potentially creating a budget gap. Despite requests for new funding, Kenya has struggled to meet fiscal targets and has faced protests over tax increases.
The Government of Kenya is seeking a new funding program from the International Monetary Fund (IMF) after opting not to complete a final review of an existing agreement worth Ksh 103.4 billion, which could have released an additional $800 million. The current $3.6 billion program, established during the Covid-19 pandemic, is set to expire on April 1, 2023, potentially causing a budget-financing gap if a new request is not approved promptly.
The IMF confirmed that an understanding has been reached stating that the ninth review under the existing extended fund and credit facilities will not continue. Following this development, Kenya has formally requested a new program, which the IMF intends to evaluate moving forward. However, fiscal experts are watching the situation closely due to Kenya’s failure to meet key benchmarks under the current program, including reducing the fiscal deficit and enhancing revenue generation.
Past attempts by Kenya’s government to increase taxes and expand the tax base faced significant backlash, including protests last year. To manage its debt, the government recently repurchased some of its Eurobonds and intends to use approximately $950 million for retiring high-interest loans owed to the Trade and Development Bank. Furthermore, the government anticipates a $1.5 billion loan from the United Arab Emirates, which might be delayed over concerns of foreign-exchange risk as highlighted by Treasury CS John Mbadi.
In summary, Kenya is navigating a complex economic landscape by re-engaging with the IMF for a new funding program. The existing facility will expire without final disbursement, creating potential financial challenges. As Kenya seeks to improve fiscal metrics and manage public dissent against tax hikes, its reliance on external funding remains critical amid economic constraints.
Original Source: www.kenyans.co.ke
