The International Monetary Fund announced on Thursday its approval of a $938-million loan for Kenya, aimed at addressing the country’s liquidity issues and historically elevated debt levels.
The economic powerhouse of East Africa is encountering a range of challenges, including drained government finances, soaring inflation, and a steep decline in its currency, leading to a surge in debt repayment expenses.
The combined effects of the Covid pandemic, the conflict in Ukraine, and an unprecedented drought in the Horn of Africa region have inflicted severe consequences.
As per Treasury figures, by the end of June, the nation with a population of approximately 53 million had amassed a debt surpassing 10.1 trillion shillings ($66 billion), roughly equivalent to about two-thirds of the gross domestic product.
Next year, Kenya is also facing a $2-billion eurobond repayment obligation.
“This uncertainty is exerting substantial pressure on liquidity, primarily due to the sizeable eurobond maturing in 2024,” the IMF said in a statement.
President William Ruto has confirmed that Kenya is set to make the initial payment of $300 million towards the eurobond repayment next month.
The approval of the new loan deal remains contingent on an IMF board meeting scheduled for January.
The IMF stated that it would promptly release $682 million for Kenya upon approval.
“The economy has displayed resilience, with real GDP expanding by 5.4 percent in the first half of 2023, primarily due to a robust recovery in the agriculture sector following the return of rains,” it added.
The overall inflation rate persists at a stubbornly high annual rate of 6.9 percent in October, with continual increases in food and fuel prices.
The expenses related to servicing public debt, predominantly owed to China, have surged due to Kenya’s currency plummeting to historic lows.
Ruto has implemented various new and heightened taxes to bolster government revenues, despite his pledge during the previous year’s election campaign to alleviate the financial burden on everyday Kenyans.