Kenya has reached an agreement with the International Monetary Fund (IMF) to abandon its current $3.6 billion lending program and pursue a new financial arrangement. This move comes as the country grapples with mounting debt-servicing costs due to extensive government borrowing.
The existing programs under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) were initially set to expire next month. However, Kenya has opted not to proceed with the ninth review, which would have facilitated a final disbursement of approximately $480 million.
The country’s decision to seek a fresh funding program underscores concerns about its growing debt burden. As of June last year, Kenya’s debt-to-GDP ratio stood at 65.7%, significantly exceeding the sustainable threshold of 55%. The rising costs of servicing this debt have put pressure on government finances, prompting the need for a new financial framework to stabilize the economy.
The shift in Kenya’s IMF engagement reflects broader challenges in managing fiscal policy while balancing economic growth and financial sustainability. Moving forward, the new funding arrangement is expected to focus on economic reforms, improved debt management strategies, and sustainable public finance policies.
The government’s negotiations with the IMF will be closely watched, as the outcome will have significant implications for Kenya’s economic trajectory and investor confidence in the country’s financial stability.
