The Government of Kenya has returned to the International Monetary Fund (IMF) for a new funding program after agreeing not to proceed with a final review of an existing facility that would have unlocked $800 million, approximately Ksh103.4 billion.
Kenya requested a new funding program from the IMF after agreeing not to proceed with a final review of an existing facility that would have unlocked the Ksh103.4 billion deal.
According to Bloomberg, the current $3.6 billion (Ksh466.2 billion) four-year program signed in the wake of the Covid-19 pandemic that ravaged Kenya and other economies, ends on April 1.
The expiry of the facility without the final disbursement is likely to leave Kenya with a budget-financing gap if the IMF does not approve the new request in time.
''The Kenyan authorities and IMF staff have reached an understanding that the ninth review under the current extended fund facility and extended credit facility programs will not proceed,'' IMF shared in a statement following a staff visit.
''The IMF has received a formal request for a new program from the Kenyan authorities and will engage with them going forward,'' it added.
However, the return to IMF remains under close observation from fiscal experts after Kenya failed to reach key benchmarks under the current program.
Some of the benchmarks that Kenya has failed to achieve include slashing its fiscal deficit and increasing revenue-raising measures.
Attempts by the government to introduce new taxes and widen the tax bracket in the past two budgets led to violent protests last year by the Gen Zs.
Last month, the government bought back some of its Eurobonds and issued longer-dated securities, and announced it would use the balance of about $950 million (Ksh466.2 billion) to retire expensive syndicated loans owed to the Trade and Development Bank.
Additionally, the government is also expecting the full disbursement of a $1.5 billion(Ksh194.25 billion) loan from the United Arab Emirates that was initially supposed to be staggered over two tranches.
However, the UAE loan is likely to be staggered by reservations that Treasury CS John Mbadi made arguing that the UAE loan may expose Kenya to foreign-exchange risks.
Additionally, Mbadi revealed that the amount was beyond Kenya's commercial-borrowing ceiling for the current fiscal year as the government plans to lower the portion of foreign loans to about 18 per cent of the total on lower IMF receipts.
