The International Monetary Fund (IMF) stated on Tuesday that it had agreed to provide a £1 billion (€927 billion) loan to Kenya, an East African country grappling with economic and liquidity challenges.
Kenya’s economy is burdened by a debt of £70 billion (approximately €65 billion) and a substantial devaluation of its currency, the shilling, against the dollar.
In an effort to address its debt situation, President William Ruto’s government has proposed a budget that includes numerous new taxes. These taxes are expected to generate 289 billion shillings (€2 billion) to supplement the planned budget of 3.6 trillion shillings (€24 billion) for 2023-24.
The approval of this agreement still awaits validation by the IMF’s executive board, which is scheduled to meet in July. If granted, Kenya will immediately gain access to £410 million, according to the IMF.
The financial institution announced in a statement on Tuesday that its commitment to Kenya would increase to a total of £3.52 billion (€3.2 billion).
Kenya, a major economic force in East Africa with a population of approximately 53 million, is contending with high inflation (+7.9% year-on-year in April) and a severe drought. The growth rate has stalled at 4.8% in 2022, far from the 7.6% achieved in 2021.
“The government budget has been under pressure due to shortfalls in revenue collection and challenging financing conditions,” stated the IMF.
The financial institution also urged the Kenyan authorities to implement reforms in public enterprises, particularly highlighting the national electricity provider Kenya Power and the airline Kenya Airways, both of which recorded substantial losses in 2022.
President William Ruto’s government, elected in August 2022, aims to reduce the deficit by introducing new taxes, notably on cosmetics, fuel, and gambling.
While the IMF believes that Kenya’s medium-term outlook is promising, the financial institution emphasizes that “significant challenges remain in the context of slower global economic growth and difficult financial conditions.”