Kenya will soon know the outcome of a Ksh77.8 billion ($600 million) disbursement from the International Monetary Fund (IMF), as the executive board is set to review the countryโs performance under the current loan programme on Wednesday, October 30.[โฆ]CLICK HERE TO READ THE FULL ARTICLEโถ
The seventh review of the $3.9 billion (Ksh506 billion) IMF loan programme, initially agreed upon in 2021, is crucial for the release of the funds. While an agreement was reached between IMF staff and Kenyan officials in June, anti-government protests over programme reforms, which resulted in at least 60 passing, necessitated the resumption of discussions.
The protests had been sparked by controversial tax measures, which the government subsequently abandoned, forcing a reassessment of the fiscal framework.
Already, Treasury Cabinet Secretary John Mbadi has revealed he is set to leave for Washington this weekend to engage in discussions with IMF and World Bank representatives. He remained optimistic about the upcoming review, asserting that all concerns raised by the IMF have been addressed.
โWith the IMF, I think we are done with the issues they raised,โ he stated confidently. Mbadi added that while securing the funds is critical, Kenya would continue to manage its financial situation even if the loan is delayed.
Kenyaโs debt position remains precarious, with the country classified as being at high risk of debt distress. The IMF loan is part of broader efforts to mitigate that risk, with an additional $1 billion expected by mid-2025. However, delays in the loan approval have strained the Treasuryโs budget, especially after the collapse of the Finance Bill, which had aimed to raise an additional Ksh346 billion through taxes.
The delay has widened the budget deficit from the initially projected 3.3 per cent of GDP to 4.3 per cent, leading the government to seek alternative funding. To plug the gap, a supplementary budget increased borrowing by Ksh171.6 billion, with the deficit now standing at Ksh768.8 billion. The government plans to raise Ksh413 billion from local lenders and Ksh355.5 billion from foreign sources, while needing to repay Ksh330.7 billion in external loans before the end of June.
Adding to the urgency, Central Bank Governor Kamau Thugge last week noted that Kenya had met most of the IMFโs review targets, except those related to revenue collection. The IMF review will also cover a separate climate-financing programme linked to the countryโs resilience and sustainability efforts, a key component of Kenyaโs financial strategy.
The IMF’s assessment will be based on the current economic conditions, which were affected by the nationwide protests in June. Following the demonstrations, an IMF delegation visited Kenya in September to evaluate the impact of the decision to abandon the proposed tax hikes. The IMF has indicated that adjustments to the programme may be necessary, considering the evolving circumstances.
Governor Thugge disclosed that the IMFโs seventh and eighth reviews would now be combined, expediting the disbursement process. The ninth and final review is scheduled for March 2025, as Kenya navigates its complex financial path to stabilityโฆCLICK HERE TO READ MORE ARTICLES>>>
