Kenya is to negotiate a fresh lending agreement with the International Monetary Fund (IMF) while abandoning its current programme as it grapples with economic challenges brought on by mounting debt repayment costs. The country has been relying on financial assistance from the IMF to manage its soaring debt, which has grown due to years of extensive government borrowing.
According to Haimanot Teferra, the IMF’s mission chief, the organisation has received an official request from Kenyan authorities for a new programme and will continue discussions on the matter. In a statement following a visit to Nairobi, the IMF confirmed that both parties had agreed to discontinue the ninth review of the existing Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programmes.
The ongoing $3.6 billion EFF/ECF arrangement, which is set to conclude next month, has so far disbursed $3.12 billion, with an additional $480 million expected to be unlocked had the ninth review proceeded. However, neither the IMF nor Kenyan officials provided clarification on the implications of abandoning the review.
The news triggered a drop in Kenyan dollar bonds, with the 2032 and 2048 maturities losing over 1 cent each, trading at 90.136 and 80.173 cents on the dollar, respectively. Some maturities reached their lowest levels in six months.
The IMF’s statement did not reference Kenya’s Resilience and Sustainability Facility, which was approved in July 2023. By October last year, $180.4 million of the total $541.3 million under this scheme had been disbursed.
While the details of the new programme remain unclear, including whether it will involve direct lending or advisory support, Kenya continues to struggle with the economic fallout from recent anti-tax protests and disputes over borrowing, including a controversial loan from the United Arab Emirates. The government has been working to secure alternative funding sources, including increased domestic revenue collection, to meet its debt obligations and finance critical sectors such as climate adaptation.
With a debt-to-GDP ratio of 65.7% as of June 2023—well above the recommended sustainable threshold of 55%—Kenya recently joined other African nations, including Ivory Coast and Angola, in issuing bonds to refinance maturing debts and safeguard key public expenditures like healthcare.
