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IMF APPROVES $606 MILLION FOR KENYA, SPARKING OUTRAGE OVER HIGH BORROWING

IMF APPROVES $606 MILLION FOR KENYA, SPARKING OUTRAGE OVER HIGH BORROWING
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Faith  Nyasuguta 

The International Monetary Fund (IMF) has approved a disbursement of $606.1 million to Kenya to support the government’s efforts in rebuilding fiscal buffers and resilience to climate shocks. The IMF executive board’s decision allows the disbursement of special drawing rights (SDR) 365.28 million ($485.8 million) under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements, and SDR 90.47 million ($120.3 million) under the Resilience and Sustainability Facility (RSF).

This financial support comes at a critical time for Kenya, which has been grappling with significant revenue shortfalls and heightened debt obligations. The IMF’s decision aims to help Kenya stabilize its economy, strengthen its fiscal reserves, and enhance resilience to climate-related shocks. However, the disbursement is lower than the government’s initial expectations, highlighting the ongoing challenges in balancing fiscal consolidation efforts with the need for critical social spending.

Kenya’s high borrowing has been a growing concern, with the country’s debt levels reaching alarming heights in recent years. The National Treasury had projected a combined disbursement of $874 million under the IMF’s seventh and eighth reviews, but the actual disbursement fell short of this target. This shortfall shows the difficulties faced by the Kenyan government in managing its debt obligations while addressing pressing social and developmental needs.

/IMF/

The IMF has emphasized the importance of improving governance, transparency, and accountability to restore public trust and secure the necessary revenue to meet these challenges. The EFF/ECF arrangements aim to support Kenya’s efforts to address debt vulnerabilities, safeguard resources for priority social and developmental needs, build resilience to shocks, and support broader economic reforms. The RSF arrangement is designed to reinforce Kenya’s efforts to address climate-related challenges and catalyze private climate finance.

Despite the financial support from the IMF, Kenya continues to face significant fiscal challenges. The withdrawal of the Finance Bill 2024 and public resistance to new tax measures challenged the government’s efforts to boost domestic revenues and balance public spending with debt service obligations. The IMF has called for strategic fiscal adjustments to address Kenya’s debt vulnerabilities while protecting critical spending in social and development sectors.

The high level of borrowing has sparked outrage among citizens and analysts, who argue that the government’s debt management strategy is unsustainable. Critics point to the burden that rising debt levels place on future generations and the risk of economic instability if debt servicing becomes unmanageable. There are growing calls for more stringent fiscal discipline and a comprehensive review of the country’s borrowing practices to ensure long-term economic sustainability.

While the IMF’s disbursement provides the alleged much-needed support for Kenya’s economic stability and climate resilience, the country’s high borrowing and fiscal challenges remain pressing concerns. The government must continue to implement reforms to improve governance, transparency, and accountability to restore public trust and secure the necessary resources to meet its economic and social goals. 

William Ruto /X/

Additionally, addressing the concerns of those outraged by high borrowing levels will be crucial to maintaining public confidence and ensuring sustainable economic growth.

The country’s leadership will need to strike a delicate balance between immediate financial relief and long-term economic health, making strategic decisions that will shape Kenya’s economic future for years to come.

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Faith Nyasuguta

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