Kenya has opted out of a final review for an IMF facility worth $800 million and is now requesting a new support program. With the existing $3.6 billion program due to expire, experts express concerns over Kenya’s unachieved financial targets. Additional efforts include bond buybacks and awaiting a $1.5 billion loan from the UAE, which may face delays due to budgetary concerns.
Kenya has sought a new funding arrangement from the International Monetary Fund (IMF) after deciding not to continue with the final review of an existing facility that could have released $800 million, equivalent to approximately Ksh 103.4 billion. The current funding program, a $3.6 billion deal established post-Covid-19, is set to expire on April 1. Without timely approval of the new request, Kenya faces a significant budget-financing gap.
An IMF statement indicated, “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 IMF has acknowledged a formal request from Kenya for a new program and plans to engage in discussions with the government moving forward.
The situation is under scrutiny from fiscal experts, especially since Kenya has not met crucial benchmarks related to fiscal deficit reduction and revenue enhancement. Previous attempts to introduce new taxes resulted in violent protests, particularly among the youth last year.
Recently, the Kenyan government repurchased some Eurobonds and issued new, longer-term securities, planning to utilize about $950 million from these measures to retire costly syndicated loans owed to the Trade and Development Bank. Furthermore, the government anticipates receiving $1.5 billion from the United Arab Emirates, which may, however, face delays due to concerns over foreign-exchange risks raised by Treasury Cabinet Secretary John Mbadi.
Additionally, Mbadi has noted that the total amount from the UAE loan might exceed Kenya’s commercial borrowing limits for the current fiscal year, as the government aims to reduce foreign loans to 18% of the total amid decreasing IMF disbursements.
In summary, Kenya’s decision to abandon the final review of its current IMF facility has led to a request for a new funding program to prevent a budget-financing shortfall. The IMF’s acknowledgment of this request comes after Kenya failed to meet critical fiscal benchmarks. As the government navigates financial constraints, particularly regarding its loan obligations and contributions from foreign partners, its fiscal management remains a point of concern. The country now faces the challenge of securing timely funding and addressing its existing fiscal issues while ensuring economic stability.
Original Source: www.kenyans.co.ke
