President William Ruto’s administration has commenced talks with the United Arab Emirates (UAE) to acquire a Ksh193 billion ($1.5 billion) credit facility to help bridge the budget deficit.
According to Bloomberg, the loan will carry an interest rate of about 8.2 per cent, however, the terms and conditions of the credit may change as discussions continue.
While the financing comes with a rather high interest rate, Kenya joins the list of African nations that have benefitted from Abu Dhabi’s bailouts. The move comes hardly a year after Egypt received Ksh4.5 trillion ($35 billion) from the Asian lender.
Kenya whose current budget deficit stands at 4.3 per cent of its Gross Domestic Product (GDP) is in dire need of the money as an alternative to the Ksh77 billion International Monetary Fund (IMF) loan which Kenya is yet to receive.
Currently, the government is at a crossroads with the Bretton Woods Institution over the disbursement of the multi-billion loan after the latter decided to delay the release of the funds.
President William Ruto’s decision to withdraw the Finance Bill 2024 after public uproar contravened the agreement reached between Kenya and the multilateral lender, a situation that forced the IMF to withhold the disbursement.
The United States Ambassador to Kenya, Meg Whitman who spoke to Citizen TV on August 28 revealed that the loan approval that was to happen on June 12 was cancelled because the government went against the Fund's agreement by withdrawing the controversial bill.
"The IMF was going to approve a disbursement around June 12 but when the Finance Bill got pulled down, they could no longer do it," Meg Whitman noted.
"I believe it is important for that disbursement to be given out because Kenya faces a very difficult situation," the US ambassador added.
However, after months of contemplating support for the country, the IMF officials recently visited Kenya and held a six-day meeting with a focus on the recent developments in the country.
The discussions also involved policies and reforms to address the emerging economic and fiscal challenges. According to the IMF team leader Haimanot Teferra, during the meeting, the government expressed its commitment to making economic and governance reforms to fit the Fund's recommendations.
"The Kenyan authorities and IMF staff had productive discussions on the authorities' policies and reforms to address the evolving economic and fiscal challenges,” read part of the statement by the IMF.
