Kenya and IMF Initiate Talks for New Lending Programme

Kenya and the IMF have agreed to start talks on a new lending programme, abandoning the ninth review of a $3.6 billion loan. This move comes as Kenya faces rising debt-servicing costs and economic challenges. Treasury Secretary Mbadi has confirmed the government’s pursuit of new financing, highlighting the need to enhance revenue collection amid pressures from protests and unsustainable debt levels.

Kenya has reached an agreement with the International Monetary Fund (IMF) to initiate formal discussions regarding a new lending programme, abandoning the previously planned ninth review of the current $3.6 billion loan. This decision was made as Kenya seeks continued financial support to stabilize its economy amid rising debt-servicing costs from extensive borrowing over the past decade.

The IMF’s mission chief, Haimanot Teferra, confirmed this understanding in a statement following her visit to Nairobi. “The ninth review under the current Extended Fund Facility and Extended Credit Facility programs will not proceed,” she noted. The Kenyan government has formally requested a new programme to better address its financial challenges.

The existing programme, which commenced in April 2021, is set to expire next month, but its implementation has faced significant obstacles, including protests against tax hikes and disputes over new financial borrowing. Treasury Cabinet Secretary John Mbadi indicated last month that the government is actively seeking a new financing programme.

As of the end of October, the IMF had approved disbursement of $3.12 billion under the current programme. Kenya is working to secure new financing sources and enhance revenue collection to meet its escalating expenditure needs and manage its substantial debt servicing obligations. The country’s debt-to-GDP ratio was reported at 65.7% as of June last year, significantly above the sustainable threshold of 55%.

In conclusion, Kenya’s agreement with the IMF to pursue a new lending programme underscores the country’s commitment to strengthen its economic stability amid financial challenges. The decision to forego the ninth review of the existing loan reflects both the urgency of the situation and the complexities involved. As the government seeks to enhance revenue collection and explore new financing avenues, the impending discussions with the IMF will be crucial for addressing Kenya’s growing economic concerns.

Original Source: ntvkenya.co.ke