The International Monetary Fund (IMF) has approved a new loan exceeding $941 million for Kenya, aiming to bolster the financial stability of the East African nation facing economic challenges.
The funds come at a crucial time for Kenya, grappling with a significant debt burden, a cost of living crisis, and a depreciating currency.
In a statement released on Wednesday, the IMF disclosed that its executive board greenlit the loan, with an immediate disbursement of $624.5 million. The total disbursements under various credit facilities are projected to reach approximately $2.6 billion.
Despite the economic hurdles, the IMF forecasts Kenya’s economic growth to hover around five percent in the current year, a slight decline from the estimated 5.1 percent in 2023.
Antoinette Sayeh, IMF Deputy Managing Director and Acting Chair, noted that Kenya’s growth has demonstrated resilience in the face of mounting external and domestic challenges.
The credit arrangements with the IMF aim to reinforce macroeconomic stability, fortify policy frameworks, withstand external shocks, advance key reforms, and foster more inclusive and environmentally sustainable growth.
As of the latest Treasury data released this month, Kenya’s public debt has surged to 10.585 trillion shillings ($65.5 billion). In a departure from an earlier commitment, Kenya opted not to repurchase a portion of a $2 billion Eurobond due in June.
Instead, Finance Minister Njuguna Ndung’u revealed that the country had paid $68.7 million in interest on the bond, avoiding a potential default.
Despite President William Ruto’s initial plan in November to buy back $300 million of the Eurobond, citing concerns over escalating public debt, the country has faced challenges in fulfilling this commitment.
Ruto has implemented new or increased taxes to replenish government coffers, but these measures have encountered public resistance, given the rising costs of essential goods. Inflation, reaching 6.6 percent in December, is expected to persist in the first half of the year. Concurrently, the Kenyan shilling is trading at historic lows, hovering around 160 to the dollar.
