Following widespread speculation on the reasons behind the International Monetary Fund (IMF's) decision to approve a Ksh142 billion loan to Kenya, the Bretton Wood institution on Wednesday, July 19 gave justifications on why it had decided to advance the facility despite concerns over the country's mounting debt.
Speaking during a media briefing, Haimanot Teferra, the IMF Mission Chief for Kenya, noted that Kenya had made a good case on why the money was needed and had submitted a viable repayment formula.
Teferra emphasised that the Kenya Kwanza government successfully demonstrated the absence of any default risk by showcasing its commendable endeavors in mobilizing local revenue through tangible efforts.
Additionally, she highlighted that the fund was particularly impressed with the government's approach in curbing borrowing by ensuring that mobilised revenue was not entirely allocated to servicing debts
Teferra further noted that the country had demonstrated proof of spending efficiency through the institution of austerity measures.
Some of the austerity measures that President William Ruto has implemented include; reducing non-essential spending on travelling, advertising and training.
IMF also noted that it was comfortable with the Central Bank of Kenya (CBK's) reserve position.
Teferra expressed confidence in CBK's policies instituted to ensure that the country was in a good position to meet its obligations in terms of repaying loans.
How Kenya will repay the IMF loan
IMF was tasked to explain what would happen if Kenya defaulted since the loan was largely dependent on the country raising extra revenue through the Finance Act, 2023.
The mission chief noted that while IMF was monitoring the situation on whether the suspension of the Finance Act would be lifted, the institution was not entirely worried about Kenya defaulting.
“The authority (Kenya) was able to provide us with contingency plans on how the loan would be repaid,” she explained.
According to Teferra, Ruto’s government had laid out different repayment plans including contingency plans in case the Finance Act is thrown out by the courts.
