Kenya and the IMF agreed to start talks for a new lending programme, abandoning the ninth review of the existing $3.6 billion loan. Haimanot Teferra stated that the current programme, beginning in April 2021, faces challenges including protests and new borrowing disputes. Finance Minister John Mbadi confirmed the need for a new financing programme amid rising expenditure and a debt-to-GDP ratio exceeding sustainable levels.
Kenya and the International Monetary Fund (IMF) have mutually agreed to initiate discussions regarding a new lending programme, foregoing the ninth review of the existing $3.6 billion loan. The decision was made in light of the rising debt-servicing costs that Kenya faces due to an extensive borrowing campaign over the past ten years.
Haimanot Teferra, the IMF’s mission chief, confirmed that the parties had reached an understanding concerning the discontinuation of the ninth review under the prevailing Extended Fund Facility and Extended Credit Facility programmes. “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,” she stated following her visit to Nairobi.
The Kenyan government has submitted a formal request for a new programme, as the current agreement, which commenced in April 2021, is set to expire next month. Nonetheless, implementation challenges have arisen due to significant protests regarding tax hikes and disputes over new borrowing from the United Arab Emirates.
Finance Minister John Mbadi has indicated the government’s intent to secure a financing programme to address rising fiscal demands and debt servicing costs. As of October, $3.12 billion had been approved for disbursement under the current lending programme. Moreover, Kenya’s total debt-to-GDP ratio was reported at 65.7% as of June of the previous year, significantly exceeding the sustainable threshold of 55%.
In conclusion, Kenya and the IMF are set to commence discussions on a new lending programme, abandoning the review of the current agreement due to the country’s escalating debt obligations. The government is actively seeking ways to enhance revenue generation amid political challenges and increasing financial strain, while also striving to manage its debt-to-GDP ratio that remains above sustainable levels.
Original Source: www.straitstimes.com
