IMF cautions Kenya’s financial stability amid plans for Sh194 billion UAE loan
By Lucy Mumbi |
The warning follows the IMF's approval in October of a Sh78 billion loan to Kenya. The decision was part of a review process disrupted earlier this year during anti-government protests.
The International Monetary Fund (IMF) has raised concerns over Kenya's plan to secure a $1.5 billion (Sh194 billion) commercial loan from the United Arab Emirates (UAE), warning that the move could exacerbate the country's already high risk of debt distress.
IMF Director of Communication Julie Kozack highlighted the precarious state of Kenya's financial health, emphasising that any additional borrowing must be aligned with a comprehensive fiscal strategy aimed at reducing debt vulnerabilities.
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"We assess Kenya to have a high risk of debt distress. Any new borrowing should be considered within the context of a comprehensive fiscal strategy to reduce debt vulnerabilities while also addressing the recent and emerging fiscal challenges," Kozack said.
She further noted the delicate position faced by Kenyan policymakers, who must balance the need to boost domestic revenues with addressing spending priorities such as social programmes, healthcare, and education, all while managing rising public debt.
The warning follows the IMF's approval in October of a Sh78 billion loan to Kenya. The decision was part of a review process disrupted earlier this year during anti-government protests.
The IMF expressed confidence that the funds would aid Kenya in tackling its economic challenges and rebuilding its fiscal policies.
National Treasury PS Chris Kiptoo said that the government plans to stagger the disbursement in tranches to remain within the borrowing limits set by the IMF, with the first Sh90 billion expected in January, with the rest of the amount set to be channelled to the Kenyan accounts later.
This is likely among the issues a top IMF executive will likely engage Kenyan authorities in the planned visit slated for December 9-10.
A communiqué from the fund on November 21 indicated that the deputy managing director Nigel Clarke will travel to Nairobi as part of the ongoing engagement with the authorities.
Kenya is currently engaged in three IMF programs: the Extended Fund Facility (EFF), the Extended Credit Facility (ECF), and the Resilience and Sustainability Facility (RSF).
The EFF and ECF focus on reducing inflation and stabilising economies, while the RSF supports climate-related initiatives.
The approval of these programs has enabled Kenya to access $606 million (Sh78.4 billion), bringing total disbursements under the arrangements to $3.1 billion (Sh401 billion).
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