Kenya Seeks New IMF Deal After Dropping Current Program, Reports Reuters
Kenya and the International Monetary Fund (IMF) are discussing a new financial support program after deciding to end the current one. This comes as Kenya struggles to manage its economy, which has been hit hard by high debt payments caused by heavy government borrowing in recent years.
According to Reuters, Kenya needs continued support from the IMF to help pay its debts. The current IMF program, worth 3.6billion,issettoexpirenextmonth.Thetwosideshaveagreednottoproceedwiththeninthreviewofthisprogram,whichcouldhavereleasedabout3.6billion,issettoexpirenextmonth.Thetwosideshaveagreednottoproceedwiththeninthreviewofthisprogram,whichcouldhavereleasedabout480 million in funding.
The IMF’s mission chief, Haimanot Teferra, confirmed that Kenya has formally requested a new program. However, it is not yet clear whether this will involve new loans or other forms of support.
The news of the canceled review caused Kenya’s dollar bonds to drop, with some reaching their lowest levels in about six months. Analysts say the market is disappointed, as Kenya may miss out on up to $800 million in expected funding from various IMF programs.
Despite this, there is some hope. Kenya recently issued a 1.5billionEurobondandsecureda1.5billionEurobondandsecureda1.5 billion loan from the United Arab Emirates, which has reassured investors. Experts say a new IMF deal would be the best outcome, as it could include funds from the canceled review.
Kenya’s current IMF program began in April 2021 but faced challenges, including violent protests last year over tax hikes and disputes over borrowing from the UAE. The government is now looking for new ways to raise money, including improving tax collection, to manage its debt and fund important projects like climate change adaptation.
Kenya’s debt is high, standing at 65.7% of its GDP as of June last year, well above the 55% level considered sustainable. Like other African nations, such as Ivory Coast and Angola, Kenya is borrowing new money to pay off old debts and protect critical spending areas like healthcare.
This situation highlights Kenya’s efforts to stabilize its economy while dealing with significant financial challenges. The new IMF program could provide much-needed support, but the details are still unclear.
Credit: This story is based on reporting by Reuters.