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Kenya to pay Sh25 billion in interest, fees to IMF by April

President William Ruto with Kristalina Georgieva, managing director of the International Monetary Fund (IMDF), in Sharma El-Sheikh, Egypt, on September 21, 2023. (Photo: PCS)

By Amina Wako | Monday, January 22, 2024

This announcement follows the IMF's recent approval of a Sh110.8 billion disbursement to Kenya.

Kenya is set to pay Sh25 billion in interest and fees to the International Monetary Fund (IMF) by April 2024.

The country's position as a major revenue earner for the IMF, contributing about two per cent of the institution's lending income in the financial year 2024, indicates the magnitude of its engagement with the international financial body.

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According to the IMF, "Fund income from Kenya is projected to account for about two per cent of total lending income in FY2024 [ending April], based on a desk survey scenario for projected programme demand as of September 2023."

Estimates indicate that Kenya's projected fees for 2024 will amount to Special Drawing Rights (SDR) 116 million, with one unit currently valued at approximately Sh215.5.

The IMF's lending income encompasses charges on the use of credit, service charges, and commitment fees.

Latest approval

This announcement follows the IMF's recent approval of a Sh110.8 billion ($684.7 million) disbursement to Kenya, expanding the overall lending size to the country.

The approval stems from the completion of the sixth review of Kenya's multi-year arrangement under the Extended Fund Facility (EFF) and Extended Fund Facility (ECF), along with the inaugural review of the Resilience and Sustainability Facility (RSF).

Kenya sought financial assistance from the IMF in 2020 in response to the economic downturn caused by the COVID-19 pandemic.

As of December 31, 2023, Kenya's outstanding loans to the IMF stood at $2.051 billion (Sh332 billion), making it the ninth-highest debtor globally.

However, the increased reliance on IMF loans has come with stringent conditions, adding pressure to Kenya's fiscal landscape.

The IMF has imposed tough structural benchmarks, demanding the discontinuation of subsidies on fuel and electricity, aiming to alleviate pressure on the National Treasury and redirect funds towards the repayment of both domestic and external debts.

The lender has also proposed stringent tax measures, exacerbating the burden on Kenyan taxpayers.

This move is part of the IMF-backed austerity drive to boost the government's annual revenues and address the budget deficit.

With Kenya's debt repayments skyrocketing in recent years, President William Ruto said in December, during a joint press interview with the leading television stations, that for every Sh10 collected, Sh7 is used for the settlement of debt accrued during the previous administration, and that the remaining portion is used for other national necessities like paying salaries for civil servants.

"For every Sh10 I collect, Sh7 go to paying debt, which William Ruto did not accumulate. The Sh3 we have to pay our children to go to school, we have to manage our health and our security, and we have to pay our teachers and manage everything else," Ruto said.

In the year leading up to June 2022, Kenya paid a substantial Sh305.66 billion to repay external creditors, comprising Sh184.53 billion in principal payments and Sh121.13 billion in interest.