Kenya and the International Monetary Fund (IMF) have agreed to abandon the ninth review of the country’s $3.6 billion loan programme and will instead negotiate a new financing deal. The decision comes as Kenya seeks continued financial support to stabilize its economy amid rising debt-servicing costs.
IMF mission chief Haimanot Teferra confirmed the development, stating that the ninth review under the current Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programmes will not proceed. Instead, Kenyan authorities have formally requested a fresh financing programme, discussions for which will begin soon.
The existing loan arrangement, which began in April 2021, is set to expire next month. While the programme was designed to support Kenya’s economic recovery and fiscal reforms, its implementation has faced hurdles, including deadly protests against tax hikes last year and controversy over new borrowing from the United Arab Emirates. By October 2023, the IMF had approved the disbursement of $3.12 billion under the arrangement.
Kenya’s economic challenges are largely driven by a decade-long borrowing spree, which has left the country struggling with ballooning debt repayments. The government has been racing to secure new financing sources while boosting domestic revenue collection to meet expenditure demands.
Finance Minister John Mbadi previously indicated that the government would seek a new IMF financing programme to help manage the country’s economic pressures. As of June 2023, Kenya’s total debt-to-GDP ratio stood at 65.7%, well above the 55% threshold considered sustainable.
With the IMF negotiations now shifting toward a new programme, Kenya’s fiscal policy and debt management strategies will be under scrutiny. The outcome of these discussions will be crucial in determining the country’s economic stability in the coming years.
