The government has been forced to come up with new ways of bridging the budget deficit after the International Monetary Fund (IMF) cut the country's loan size.
Nonetheless, Treasury has exuded confidence that the reduction in the loan allocation will not cause any major impact on the country's economy.
Kenya has now shifted its focus to the International Capital Markets as it seeks to raise more money to fund the Budget for the 2024/2025 Financial Year.
In particular, the government is set to go for new loans by partnering with foreign investors who are willing to lend the country long-term loans.
By resorting to this, the government will trade securities including stocks and bonds in the international market as it seeks to acquire long-term financing.
The move was prompted by the IMF's decision to cut its loan allocation to Kenya by Ksh36 billion from Ksh498.5 billion to Ksh462 billion.
The reduction in the loan size was attributed to the government’s decision to buy back part of the Ksh310 billion ($2 billion) Eurobond in February this year.
IMF's loan to Kenya was meant to cover the budget deficit which currently stands at about Ksh500 billion, according to the proposed budget.
"So we have access to the money from the market and agreed with the IMF that we don't need the $1.7 billion, so we are now going to get $1.4 billion," Treasury Principal Secretary Chris Kiptoo told the Africa Report.
“The policy package seeks to preserve debt sustainability and price stability, manage fiscal risks, and address financial sector vulnerabilities," IMF noted in a statement.
"To this end, the authorities have taken decisive steps towards fiscal consolidation by introducing several measures in the context of the draft 2024/25 Budget and the 2024 Finance Bill," the statement added.
Following the reduction, Kenya will have immediate access to Ksh15.5 Billion (USD 120 million) once the funds are approved by the IMF's executive board.
