Kenya Seeks New IMF Funding After Abandoning $800 Million Deal

Kenya has rejected the final review of its existing IMF deal, seeking a new program to cover a budget gap as its current facility expires soon. Fiscal experts are concerned due to Kenya’s failure to meet key financial benchmarks. The government is also managing its debt profile through various financial maneuvers and external loans.

The Government of Kenya is pursuing a new funding program from the International Monetary Fund (IMF) after opting not to complete a final review of an existing agreement. This previous deal could have unlocked approximately Ksh 103.4 billion (around $800 million). Currently, Kenya’s four-year program totaling $3.6 billion (Ksh 466.2 billion), initiated post-Covid-19, is set to expire on April 1, 2024.

Without the final disbursement, Kenya may face a significant budget-financing gap unless the IMF approves the new request promptly. The IMF confirmed that the Kenyan authorities and its staff have agreed to forgo the ninth review of the existing programs. The IMF stated, “The IMF has received a formal request for a new program from the Kenyan authorities and will engage with them going forward.”

This return to the IMF is closely monitored by fiscal experts due to Kenya’s shortcomings in meeting critical benchmarks set under the current program. Notably, the country has struggled to reduce its fiscal deficit and improve its revenue-raising measures. Efforts to introduce new taxes sparked violent protests last year among younger citizens.

Recently, the Kenyan government took measures such as repurchasing Eurobonds and issuing longer-dated securities, planning to allocate about $950 million (Ksh 466.2 billion) to settle high-cost loans owed to the Trade and Development Bank. Additionally, the government anticipates receiving a $1.5 billion (Ksh 194.25 billion) loan from the United Arab Emirates, although this amount may be staggered due to concerns expressed by Treasury Cabinet Secretary John Mbadi regarding potential foreign-exchange risks.

Furthermore, Mbadi indicated that the amount exceeds Kenya’s current commercial-borrowing ceiling as the government aims to reduce foreign loans to about 18 percent of the total in light of diminished IMF support.

In summary, Kenya has opted not to finalize its existing agreement with the IMF, prompting a request for a new bailout to address a looming budget crisis. The government has encountered multiple challenges, including failing to meet fiscal benchmarks and public discontent towards increased taxation. Meanwhile, it is pursuing alternate financial strategies and expects further developments in its negotiations with the IMF and other financial entities.

Original Source: www.kenyans.co.ke